10 Dec 2012

RBA cut prompted by sinking of commodity boom

7:19 am on 10 December 2012

The unravelling of the commodity boom last week encouraged the Reserve Bank of Australia to lower official interest rates to the levels prevailing at the height of the financial crisis.

Radio New Zealand's Sydney correspondent says Australian mineral export prices have catapulted due to Chinese demand for the past decade.

But the national accounts for the September quarter show that process is now going in reverse, with income falling in annual terms for the first time in two decades.

Export income fell 4% amid falling prices for coal, iron ore and other commodities.

Quarterly GDP growth at 0.5% was at the low end of expectations and provided vindication for the Reserve Bank in lowering cash rates to 3%, equalling the lows reached at the height of the financial crisis four years ago.

The GDP result has sparked expectations of reductions in the rate of up to another percentage point in the coming year.