A less-than-impressive inflation result, combined with a drop in consumer sentiment and the continued economic fallout from England’s decision to leave the European Union, has encouraged the Reserve Bank to reduce the official cash rate.
Tuesday’s decision means the cash rate has been reduced to the all-time low of just 1.5%. The RBA said the timing was right, as current market conditions warranted another rate reduction.
Data from the Westpac Melbourne Institute of Consumer Sentiment found confidence dropped 3% in July to the point where pessimists outnumbered optimists.
Mortgage Choice chief executive officer John Flavell said the drop in confidence could be attributed to both the prolonged period of uncertainty around the Federal election and the fallout of England’s decision to leave the European Union.
“People are cautious about the future, which is something the Reserve Bank was and is acutely aware of,” Flavell said.