Australia's cash rate 'provides room for manoeuvre'

Australia's cash rate provides the Reserve Bank of Australia (RBA) with room to make further cuts in order to stimulate the economy, a position many other central banks are not in.

This is according to Westpac's head of retail banking Rob Coombe, who said during a speech in Sydney that with the cash rate at 4.75 per cent, the RBA still has "plenty of firepower", reports the Australian.

He stated that the RBA could use this to "ensure the economy doesn't collapse into the throes of the paradox of thrift".

"The significant reduction of interest rates is the strongest tool to have in the kit bag," he noted.

According to Westpac, the first cut in a year is likely to take place in the coming two months and by the end of 2012, there will have been a 100-point reduction in the cash rate.

Earlier this month, Commsec chief economist Craig James asserted that recent figures showing a decline in the number of job advertisements online and in newspapers means a cut in the cash rate is increasingly likely.

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