Australian OCR Cut by 1%

December 2, 2008 International FinanceNew Zealand Taxation  No comments

The Reserve Bank of Australia has surprised analysts by cutting the Official Cash Rate (OCR) by 1%, 25 basis points above what many expected.

The Reserve Bank of Australia has made its fourth OCR cut in a row. The Australian OCR now stands at 4.25 %. In total the OCR has fallen 3% since September. While it was expected that a cut would be made, many analysts believed it would be more along the lines of 0.75% and not the full 100 basis point cut.

Australia has not been hit by the current economic situation in the same way as the United States, faring more like New Zealand. Throughout this though, Australia is facing the weakest economic outlook today than in the last 20 years. While there is no defintte reason for this to be true, the weak market sentiment and fear of future loses is enough to warrant action by the Australian government.

Suprising cuts such as this one point to a possibility of a higher than expected cut in the New Zealand Reserve Bank OCR review, lending credence to estimates of 1.5% cuts.