21 Apr 2009

RBA rate cut prompted by unexpectly bad economic news

1:52 pm on 21 April 2009

The Reserve Bank of Australia cut interest rates earlier this month after it realised the outlook for economic growth was even worse than expected.

Minutes of a board meeting on 7 April, issued on Tuesday, show the RBA acknowledged the economic slowdown had probably met the conventional benchmark for recession - two consecutive quarters of declining gross domestic product.

However, the minutes say: "The latest set of indicators suggested that GDP was likely to have fallen again in the March quarter."

GDP fell 0.5% in real, seasonally adjusted terms, in the December quarter according to estimates issued by the Australian Bureau of Statistics in March.

The minutes acknowledge that the forecast before the board on 7 April was bleaker than the outlook underpinning a earlier quarterly statement on monetary policy issued on 6 February, and confirmed that a further deterioration in the labour market was likely.

The RBA cut the rate the following day, 8 April, to 3% - the lowest for 48 years.