Australia's central bank has surprised the markets by slashing its official interest rate, saying global growth was adding pressure to the country's economic outlook.
The Reserve Bank of Australia (RBA) cut the rate down to a three-year low of 3.25 per cent, which is a decrease of one-quarter of a per cent.
This is the first cut to the cost of borrowing made by the central bank since June and it noted the strength of the Australian dollar and weak export prices justified this action.
Slowing growth in China – a major trading partner – in addition to Europe, has had a detrimental impact on order books.
Economists had expected the central bank to wait until inflation figures were announced later this month to make this move.
"The Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target," RBA governor Glenn Steven stated.
At close of play this morning (October 2nd) the Sydney All Ordinaries Index was stable, finishing nearly 0.1 per cent higher to an index value of 4451.90 points.
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