Australia slashes rates to all-time low amid slow growth, job fears

Australia’s central bank cut interest rates for the third time this year amid fears about the flagging domestic economy. (AFP)
Updated 01 October 2019

Australia slashes rates to all-time low amid slow growth, job fears

  • Australia has had 28 years of expansion without recession

SYDNEY: Australia’s central bank cut interest rates for the third time this year on Tuesday in a bid to stimulate a sluggish economy and signaled it was prepared to do more if needed, knocking the local dollar to a one-month low.

The country’s economy has expanded for 28 years without a recession, but risks have intensified over the past year, with growth slowing, inflation lukewarm, the property market subdued and unemployment ticking higher.

The Reserve Bank of Australia’s (RBA) quarter-point cut took the cash rate to an all-time low of just 0.75 percent, leaving little room for more reductions and raising the possibility of unconventional policy easing.

RBA chief Philip Lowe said moves by global central banks to ease monetary policy played a part in the decision as he signaled the need for an extended period of low rates.

Financial futures are now pricing in a 60 percent chance of a fourth cut to 0.5 percent in November, compared with under 30 percent before the latest decision.

Expectations that rates will be lower for longer sent the Australian dollar slipping to $0.6706, its weakest since early September.

“In cutting rates so aggressively this year, the RBA is hoping to generate a stronger labor market, higher wage growth and to stimulate domestic consumption,” said Anthony Doyle, a Sydney-based, cross-asset strategist at Fidelity.

“Fortunately for the RBA, the transmission mechanism of monetary policy is fairly quick in the Australian economy,” he said, noting around 80 percent of mortgages were on variable rates.

The RBA’s back-to-back easings in June and July have so far done little to boost activity outside of the housing market.

Indeed, figures earlier in the day showed home prices across Australia’s capital cities jumped 1.1 percent in September, but approvals to build new homes collapsed to the lowest since 2013.

Economists expect construction-related job losses in coming months which could take the unemployment rate to as high as 5.5 percent from 5.3 percent now and the RBA’s goal of around 4.5 percent.

“The RBA now has only three, or possibly even fewer, more conventional cuts available before they will have to venture into unconventional monetary easing territory — negative rates, QE (quantitative easing), or bond yield targeting,” Rob Carnell, chief Asia-Pacific economist for ING said.


China's aviation regulator raised concerns with Boeing on 737 MAX design changes

Updated 12 December 2019

China's aviation regulator raised concerns with Boeing on 737 MAX design changes

  • China is reviewing the airworthiness of the plane
  • China was first country to ground plane in March

BEIJING: China’s aviation regulator raised “important concerns” with Boeing Co. on the reliability and security of design changes to the grounded 737 MAX, it said on Thursday, but declined to comment on when the plane might fly again in China.
China is reviewing the airworthiness of the plane based on proposed changes to software and flight control systems according to a bilateral agreement with the United States, Civil Aviation Administration of China (CAAC) spokesman Liu Luxu told reporters at a monthly briefing.
He reiterated that for the plane to resume flights in China, it needed to be re-certified, pilots needed comprehensive and effective training to restore confidence in the model and the causes of two crashes that killed 346 people needed to be investigated with effective measures put in place to prevent another one.
China was the first country to ground the 737 MAX after the second crash in Ethiopia in March and had set up a task force to review design changes to the aircraft that Boeing had submitted.
The US Federal Aviation Administration (FAA) will not allow the 737 MAX to resume flying before the end of 2019, its chief, Steve Dickson, said on Wednesday.
Once the FAA approves the reintroduction into service, the 737 MAX can operate in the United States, but individual regulators could keep the planes grounded in other countries until they complete their own reviews.
“Due to the trade war, the jury is still out on when China would reintroduce the aircraft,” said Rob Morris, Global Head of Consultancy at Ascend by Cirium.
Chinese airlines had 97 737 MAX jets in operation before the global grounding, the most of any country, according to Cirium Fleets Analyzer.