RBA Cut To 3.5%

Today the RBA cut the Australian cash rate by 25 basis points to 3.5%, effective 6 June 2012.

The Board said that with modest domestic growth and a weaker and more uncertain international
environment, the outlook for inflation afforded an escape for more accommodative monetary policy.

The Board noted that Europe would remain a potential source of adverse shocks.  Europe’s prospects
have been clouded by weakening growth, heightened political uncertainty, concerns about fiscal
sustainability and concerns about the strength of some banks.  

The RBA seem to be concerned, not just for the negative effect of Europe on the world economy,
but that it might cause households and businesses to stand aside from spending and investment.
This in turn might generate a softer domestic outlook.