It skidded 7 percent last month. The kiwi has jumped more than 4 percent against the Aussie since the inflation figures were released.
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The latest data is “a game changer” for the central bank, JPMorgan’s Sally Auld told Bloomberg News.
“The big question relevant to the housing market is how much of the lower cash rate will be passed on to mortgage rates”, Ms Koper said.
The interest rate does not necessarily make banks more profitable, but it makes their yields even more attractive compared to the rates they offer deposit holders.
The easing comes just hours before the conservative government of Prime Minister Malcolm Turnbull reveals a budget that is considered crucial for his chances in a likely July election.
The Australian market erased early losses and is advancing, ahead of the Reserve Bank of Australia’s interest rate decision later in the day. And those that do pass on a rate cut, may in fact lift rates later in the year independently of the RBA like they did last year.
Reserve Bank of Australia (RBA), made a decision to cut policy rate by 25 basis points at today’s meeting against expectations of no change in policy.
Governor Glenn Stevens said the board now considered another cut appropriate following “information showing inflationary pressures are lower than expected”.
The central bank said the move was aimed at pushing the nation’s sluggish inflation rate into its two to three per cent target band.
National Seniors Australia chief executive Michael O’Neill said this would further disadvantage older Australians on low, fixed incomes. Clearly we will see this cut reflected in Friday’s Statement on Monetary Policy, but the RBA, sensing a period of inflation outside of their target range, has acted in-line with their single mandate.
In the oil space, Oil Search is declining nearly 2 percent, Santos is losing nearly 3 percent and Woodside Petroleum is down more than 1 percent after crude oil prices tumbled overnight. It also cited declining commodity prices and ongoing uncertainty about the global economic outlook.
Brent futures slipped 0.9 percent to $46.96 a barrel in Asian trading, after notching their best monthly gain in seven years, adding 21.5 percent. Thirty-three out of 51 economists polled by Reuters had expected no rate move, but a growing number were betting on a 25-basis-point cut following last week’s surprisingly soft inflation numbers. Following 11 months of unchanged rates, only one expert on the finder.com.au RBA survey panel correctly forecast the cut.
PMI data released at the weekend showed manufacturing activity in China, the largest export market for New Zealand and Australia, expanded marginally for a second month, with a reading of 50.1 in April, easing from the 50.2 level in March and only just above the 50-point mark that separates expansion from contraction.
Much of what Stevens said could be interpreted as a reason to keep rates steady.
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Falling energy prices may have helped consumers in major importing nations, but their disinflationary effects could start waning soon, according to the World Bank. Members noted that in part, this pointed to a lower outlook for prices than previously forecasted.
