RBA: rate cuts not as effective as it used to be

Reserve Bank governor Glenn Stevens has admitted rate cuts are now less effective at boosting demand but says Australia’s struggling economy makes them essential.

Mr Stevens says the board’s monetary policy is less effective than it was a decade ago..

But he says weak inflation, high unemployment, below-average economic growth, and a high Australian dollar made it necessary to cut interest rates by 25 basis points last week to a record low of 2.25 per cent.

Mr Stevens has promised to give plenty of warning about any potential rise in rates to avoid speculation and any adverse effects on the economy.