The Reserve Bank has cut the cash rate to a new record low of two per cent, saying that falling commodity prices, weak business investment and subdued government spending are dragging on the economy.
“The economy is therefore likely to be operating with a degree of spare capacity for some time yet,” RBA governor Glenn Stevens said.
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He added that although the Australian dollar has dropped noticeably against the US dollar it will have to fall further because of the large declines in commodity prices.
There were no indications in the RBA’s short statement that it is looking to cut the cash rate further.
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