RBA interest rate decision: Reserve Bank cuts rate to record low of 0.75% – as it happened

RBA reduces cash rate costs by another 0.25% despite rising house prices. This blog is now closed

" Full report: Reserve Bank cuts interest rates to historic low to boost weak economy

8.21am BST

Thanks for joining us, we are going to leave our live coverage here. Just to recap the main points:

8.13am BST

A quick update on the Australian share market and the dollar via our friends at Australian Associated Press:

The Australian share market has enjoyed its best day in nearly a month following the Reserve Bank's decision to cut the cash rate for a third time this year.

8.05am BST

Australian Chamber of Commerce and Industry chief executive, James Pearson, has urged lenders to pass on the rate cut to "ensure the greatest benefit is gained" by households.

He said:

6.47am BST

Treasurer Josh Frydenberg has responded to the rate cut by accentuating the positive - that the RBA has pointed to "a gentle turning point in the domestic economy".

He said the RBA had noticed the "positive benefits that have been gained by the economy from the interest rate cuts, from the tax cuts, from extra spending on infrastructure from the stabilisation of the housing market and for the uptick in mining investment".

It is the government's expectation that the banks will pass on this 25 basis point rate cut in full. What this means for an Australian family with a mortgage of $400,000 is $720 less a year in interest payments. That's a significant benefit to an Australian family. It is completely reckless for the Labor Party to be talking down the Australian economy."

We have welcomed the stabilisation in the housing market and this is important because it plays into confidence for households and household consumption is around 60% of GDP. We also know that for most Australians owning their own home is not only their dream, it is their biggest asset. They want to see its value appreciate over time, which has been the history in our country. In terms of the clearance rates, they have gone up and in terms of prices they are now starting to go up. So the interest rate cuts have contributed to a stabilisation in the housing market which we welcome."

6.27am BST

Whoah. The Reserve Bank's race to the bottom continued today with its third reduction in the cash rate in five months. It takes the benchmark borrowing rate in Australia to yet another record low of 0.75%. it's more good news for borrowers and house prices. But bad news for savers and - if you think that the sight of a central bank slashing rates to a record low is something to worry about - it's also bad news for the economy because it surely means the RBA expects things to get worse..

Anyway, here are the main points:

6.14am BST

Labor's shadow treasurer Jim Chalmers put the cut on the coalition government's lack of action to stimulate the economy.

"If the Liberals were doing a good job managing the economy the RBA wouldn't have needed to cut interest rates to another new record low today," Chalmers tweeted.

BREAKING: If the Liberals were doing a good job managing the economy the #RBA wouldn't have needed to cut interest rates to another new record low today. #auspol #ausecon pic.twitter.com/YvFBl9BbBk

6.07am BST

BIS Oxford Economics are getting ahead of the curve, looking for the next big thing. They say we shouldn't expect a rate RISE until 2021.

Chief economist Sarah Hunter says the board highlighted "downside risks to the global economic outlook, and the persistent headwinds facing the domestic economy". It expected jobs growth to "slow significantly over the near term as the economy absorbs the residential construction downturn and sluggish retail environment". The bank is also projecting inflation to remain around 2% through to 2021, "which suggests there will not be a rate rise until the end of 2021 at the earliest".

6.01am BST

Capital Economics says the rate cut today was widely expected but says that the RBA's prediction of a slowdown in jobs growth (the aforementioned construction slump is a key factor here) points to another cut "by the end of the year".

The bank argued that forward-looking indicators of labour demand point to a slowdown in employment growth. Indeed, employment surveys suggest that jobs growth will slow from around 2.5% now to around 2.0% around the turn of the year. It's possible that the recent surge in the participation rate fizzles out at the same time, but we consider it more likely that unemployment will climb a bit further. Our forecast is that the unemployment rate will reach a peak at 5.5% in the first half of that year. Meanwhile, we think that global growth won't accelerate anytime soon. Business confidence will therefore remain muted and investment will probably keep falling. We reiterate our forecast that rates will fall to 0.5% before the end of the year.

5.56am BST

The comparison site Mozo.com says the rate cut could start a mortgage rate war after the online lenders Athena and Homestar said they would pass on the 0.25% cut to their customers in full. Such a move would put pressure on the big four banks to cut rates and give some more relief to Australia's debt burdened households.

Here's Mozo director Kirsty Lamont:

Online lenders are reacting to today's RBA cut with lightning speed. They're turning the screws on the big banks knowing the banks are in an unwinnable position, with the unenviable choice of having to either pass through today's cut in full to mortgage customers and take a hit to their net profit margins, or hold back part of the cut and risk losing even more borrowers to their cheaper rivals.

5.51am BST

The Greens say that the RBA has been railroaded into cutting rates because the government has refused to do its bit for the economy by increasing spending. This lack of so-called fiscal stimulus - as opposed to monetary stimulus from the RBA - has irritated senator Peter Whish-Wilson:

Without government borrowing to fund an increase in infrastructure spending, record low interest rates are re-inflating the housing market and going towards other unproductive and speculative investments. This is diluting the effectiveness of monetary policy and is railroading the RBA towards QE. Instead of being concerned about this trend, the treasurer actually seems to be cheering it along. Just last week, Josh Frydenberg was spruiking the virtue of further increases in house prices, and encouraged banks to push the limits of responsible lending barely eight months since Commissioner Hayne handed down his report."

5.48am BST

The dollar spiked to US67.57c on the news of the RBA cut but has fallen back again in the last few minutes to US67.29c as traders digest the statement from Philip Lowe.

In it he clearly lays out the prospect of more cuts - or even perhaps some less conventional policy such as money-printing or quantitative easing.

RBA officials are reluctant to discuss quantitative easing but it becomes a real possibility the closer we come to a cash rate of 0%. In the absence of meaningful fiscal stimulus, quantitative easing may soon be inevitable.

It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.

5.40am BST

Here's some reaction to the news:

More easing to come? The #RBA has cut interest rates today by 0.25% with expectations of another rate cut in early 2020 #ausbiz #ausecon pic.twitter.com/D6WzdxJOrw

RBA Cuts Yet Again! https://t.co/fjJoS2EtZn pic.twitter.com/aVh53ArVIE

With the economy travelling poorly, one more rate cut is indeed possible, but this is less and less likely with some light at the end of the tunnel

The #RBA cut interest rates 25bp to 0.75% at today's meeting in line with expectations. Leading into the meeting consensus expectations are for the next cut to be in February, although this could be pulled forward as soon as November should Q3 inflation data disappoint #ausbiz pic.twitter.com/8X5wcITyrE

5.38am BST

Philip Lowe says in his statement that:

5.34am BST

This is governor Philip Lowe's full statement after his board cut rates to yet another record low.

It's the third cut this year and reflects the bank's concern that growth is still too sluggish to reduce unemployment and boost inflation.

5.30am BST

The RBA has cut rates to 0.75%

5.29am BST

Seconds to go ...

5.27am BST

Just a few minutes to go before we get the proverbial puff of white smoke from above Martin Place. But in the meantime some interesting commentary from the banking team at UBS.

They have taken a fairly bearish view of Australia's big banks in the last couple of years and they are continuing their sceptical outlook. They say that although the housing credit downturn may be bottoming out, it's still hard yards ahead for the banks because low interest rates = low profits.

While the pick-up in lending is positive, bank fundamentals are increasingly challenged with ultra-low interest rates... With ongoing revenue pressure, we expect further dividend cuts and banks to rebase target [return of equity] to more realistic levels for an ultra-low rate environment. Following the re-rating, banks look expensive on 15.6x and 1.7x book with a falling EPS profile over the medium term.

5.16am BST

Across the ditch, a plunge in business confidence is continuing to hurt the New Zealand dollar.

It has fallen below US62.49c, the lowest since September 2015. The RBNZ caught markets off guard in August when it cut rates by 0.5% to 1%.

NZD/USD technical analysis: Kiwi hits fresh four-year low https://t.co/HbhPDmh4M8 pic.twitter.com/KiTBialSxG

5.11am BST

There were also encouraging numbers today from the Australian Industry Group (AiGroup) manufacturing index, which rose from 53.1 points to 54.7 points in September.

However, another closely watched snapshot of the economy, the CBA/IHS Markit manufacturing purchasing managers' index, fell from 50.9 points to 50.3 points. Any reading over 50 indicates expansion so the numbers tend to suggest the economy is travelling OK.

5.08am BST

Not every Liberal in Canberra is hoping for a rate cut. My colleague Paul Karp has this:

Liberal MP Tim Wilson, the chair of the House of Representatives economics committee, has told Guardian Australia that he hopes the RBA leaves interest rates on hold to give savers a break.

My hope is that the RBA leaves interest rates alone. There's not sufficient evidence that there's pass through from the last two rate cuts to stimulate the economy but there is evidence it is fuelling house price rises and ultimately higher debt.

In aggregate, Australian households benefit from the effect of lower interest rates. While the income of households with deposits is lower than if rates had not been reduced, the household sector as a whole has around twice as much debt as deposits.

5.06am BST

The CoreLogic house price index was not the only piece of data released today.

On the other side of the ledger, the number of housing approvals fell again in August, according to the Australian Bureau of Statistics this morning. Forecasters said the numbers showed that the construction downturn is not yet over.

Building approvals down a further 3.9% in August on a trend basis. Down almost 37% from its peak in May 2016. Terrible news for construction #ausbiz pic.twitter.com/fCrO5hMZOa

The quite massive fall in dwelling approvals means there is set to be a shortage of dwellings, which might be severe, in 2020 and into 2021. One implication is much higher house prices. Prices could easily rise by 20-25% over the next couple of years

4.57am BST

So more on the mega data dump this morning.

The most eye-catching was the 0.9% rise in the average national house price for September, largely driven by a strong rebound in the Sydney and Melbourne markets. Values in the two biggest cities were up 1.7% over the month, according to the CoreLogic September home value index. Prices have been boosted by increased investor activity amid lower rates and an easing of lending requirements by the banks since the May election.

Aust CoreLogic home prices up solidly again in September driven by Sydney & Melbourne as election result, rate cuts and APRA move continues to impact. After an initial bounce expect prices to be constrained on the back of still tight credit, unit supply & softer economy.#ausecon pic.twitter.com/zzO0bdAO4u

Related: To buy or not to buy? The million-dollar housing question Australians keep asking

4.43am BST

The ASX200 has risen ahead of today's rates decision. The benchmark index is up 17.30 points this lunchtime to 6,705.60, a rise of 0.26%.

The Aussie dollar is under more pressure though. It's down 0.16% to US67.4c.

4.37am BST

Good afternoon and welcome to the live blog on the Reserve Bank's interest rate decision. The bank's board members are tipped by a majority of economists to cut the cash rate by 25 basis points to 0.75% this afternoon.

The chief factors driving the move are continued sluggish economic growth and the need for the RBA to meet its inflation rate of between 2-3%.