RBA cut

The Reserve Bank has cut its cash rate by 25 basis points, to 3.5 per cent - its lowest level since November 2009. Today's decision marks the biggest back-to-back monthly reduction since the depth of the global financial crisis.

Residex CEO, John Edwards said he was disappointed with today's outcome and that he believes The Reserve should have held its position.

"The ultimate outcome of the global difficulties which are currently unfolding could well be that the Reserve Bank will need as much ammunition as possible available to it in order to maintain Australian resilience in a potentially very difficult global economy. The need for this is even more acute in a situation where the Federal Government is failing to recognise the potentially very poor timing of its new taxes and impost which are about to come into play.”

Mr. Edwards went on to say that small cuts such as the one annouced today can get overlooked in the consumer’s perception of market conditions and ultimately have little to no impact.

"This can simply work to the negative by further undermining confidence given the very wide-spread press about difficult global finances. The size of today's rate cut is such that a lot of it will probably get lost in the bankers needs to maintain margins and their stability. Funding margins in the current global finance market will be being impacted on as markets look to reduce risk exposure, particularly in Europe.”

Overall, Mr. Edwards said he would have preferred a significant reduction in July if needed when the outcome of the Greek situation is understood and known.

”A single, significant reduction of 0.5 to 0.75 per cent later in the year would have a guaranteed outcome at the consumers 'gate' once the Banks have also balanced their position.”