The Reserve Bank of Australia (RBA) today cut the cash rate by a further 25 basis points after already doing so at its regular meeting at the beginning of the month.

Today's cut takes the cash rate to 0.25%, and is likely to be the RBA's last cut for a long time, having recently flagged that it would not lower the cash rate below this threshold.  

The RBA usually only meets on the first Tuesday of every month (except January), with its next regular meeting scheduled for Tuesday April 7. 

But earlier in the week, RBA Governor Philip Lowe said there would be an additional meeting to "announce further policy measures to support the Australian economy".  

This isn't the first time the RBA has made a rate cut outside of its regular meeting - it did one in July 1997, for example - but it is the first time two changes have been made in one month. 

Not even at the height of the global financial crisis (GFC) did the Reserve Bank resort to such measures.

However, the crippling effects of the coronavirus on both the domestic and global economy forced the RBA's hand to take this unprecedented measure in a bid to stabilise Australia's economy and soften some of the blows to come. 

Governor Lowe's address was very different to one he usually delivers each month. 

He admitted that the primary response to the virus is to manage the health of the population, but stated that monetary and fiscal policy play an important role in reducing the economic and financial disruption it causes. 

"At some point, the virus will be contained and the Australian economy will recover," he said. 

"In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly."

Mr Lowe also said the board would not increase its cash rate target until full employment is reached and inflation is "sustainably" within the 2-3% range. 

He also stated that quantitative easing will start tomorrow, and that banks will be able to obtain additional funding if they increase lending to business, especially to small and medium-sized businesses.

This lending facility is for up to $90 billion, and more details will be provided in a second statement coming later today. 

"Today's policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia," he said. 

"Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery."

There's already been a flurry of activity in just the few minutes since this announcement. 

Commonwealth Bank CEO Matt Comyn said these are unprecedented times, and call for unprecedented measures. 

Commbank has already:

  • Reduced fixed rate home loans for one, two and three years by up to 70 basis points to a new low of 2.29% p.a. 
  • Launched a new term deposit rate of 1.70% p.a. for terms over 12 months (an increase of 60 basis points)
  • Reduced small business loan rates by up to 100 basis points 

Readers who want to keep track of the latest round of rate cuts to home loans can check out Savings.com.au's emergency rate cut page, and can also look at what each lender cut by for this month's first rate cut. 



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