Australia lowers key interest rate

SYDNEY- The Associated Press

A passengers ferry navigates in front of apartment buildings in Kirribilli after leaving Sydney. The country’s central bank is trying to support the domestic economy affected by the slowdown in China and the ongoing crisis in the eurozone. REUTERS photo

Australia’s central bank cut its benchmark interest rate by a quarter percentage point on yesterday as a slowdown in China’s economy and persistent weakness in Europe adding to uncertainty about Australia’s economic outlook.

The Reserve Bank of Australia’s decision to lower the rate to 3.25 percent was the bank’s third rate cut this year, and comes amid concerns that the slowing economy in China - Australia’s biggest export market - will lead to a steep drop in demand for Australia’s lucrative mineral resources
such as iron ore.

Uncertainty grows

“Uncertainty about near-term prospects is greater than it was some months ago,” Reserve Bank Governor Glenn Stevens said in a statement.

“Around Asia generally, growth is being dampened by the more moderate Chinese expansion and the weakness in Europe,” he said.

Australia’s economy has remained strong thanks to a mining boom largely fueled by China’s demand for iron ore, coal and natural gas. But lower commodity prices, Australia’s high dollar and China’s slowing growth have prompted concerns that Australia’s economic glory days
may be numbered.

Treasurer Wayne Swan dismissed those suggestions, telling reporters that China’s economy is 40 percent larger than it was before the global financial crisis.

“Whilst China may be growing a little more slowly than people had anticipated, it’s doing it
from a very much bigger base,” Swan said.