Further interest rate cuts could be on the cards

Mozo

Tuesday 08 May 2012

A week has passed since the Reserve Bank of Australia (RBA) announced major cuts to interest rates, but some economists feel that even more reductions are likely.

Treasurer Wayne Swan has revealed details of a $1.5 billion budget surplus for the country's 2012-13 financial year.

Experts believe this will eat into economic growth – forcing the value of the dollar down.

Businesses across the nation would welcome a weaker dollar, as many Aussies have been shunning local retailers and service providers in favour of foreign organisations that can sell their products far more cheaply.

The RBA surprised many by reducing the national cash rate by 50 points, when most experts were only anticipating a 25-point reduction.

Speaking to the Australian Associated Press, chief economist at AMP Dr Shane Oliver said the budget announcement would cause the economy to shrink by one per cent.

Further interest rate cuts could be on the cards

"That should be enough to justify further interest rate cuts for the Reserve Bank," he remarked.

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