The Reserve Bank has cut the cash rate by a quarter of a percentage point to a record low of 2.50 per cent, levels not seen EVER before in this country!

The RBA said it hopes its decision will aid growth in areas of the economy, not affected by the mining boom.”With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years,” said RBA governor Glenn Stevens.

“The RBA judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.”Stevens said inflation was currently running “lower than expected”. He also stated “the demand for credit remains, at this point, relatively subdued.”

The rate cut comes as the Gillard government downgraded its annual revenue forecasts, warning income had plunged Aus$17 billion due to a China-driven commodity slowdown and pressures from the dollar.  The decision had an immediate impact on the Australian dollar which fell below 102 US cents just after the announcement.

The decision will be welcomed by homeowners if the retail banks follow suit as mortgage rates should also fall. This would mean repayments on a $300,000 mortgage would drop by about $46 a month on average, if retail banks fully pass on the reduction.

NAB have already confirmed that they will be passing on the rate cut in full, coming into affect Monday 13th May.