UPDATE: MNI: RBA Lowe Hints At More After Cut To Record Low

--RBA Cuts Rates 25Bps To 1%, Lowest On Record

--Adds later comments from speech by Governor Lowe

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of Australia cut its official interest rate

for the second time in two months to a new record low on Tuesday and Governor

Philip Lowe said Tuesday the Bank is prepared to cut again.

     The RBA cut official rates by 25 basis points to 1% after a similar cut in

June, which was the first movement in rates since November 2016.

     Later, at a function in Darwin, Lowe held out the likelihood of another

cut, which would take Australian rates below 1% for the first time.

     "Given the circumstances, the Board is prepared to adjust interest rates

again if needed to get us closer to full employment and achieve the inflation

target in a way that supports the collective welfare of all Australians," Lowe

said.

     Earlier, Lowe cited below-trend GDP growth of just 1.8%, subdued

consumption expenditure, declining house prices and a "protracted period" of low

income growth as reasons for the cut.

     He said the cuts would help make "further inroads" into spare capacity in

the economy.

     "It will assist with faster progress in reducing unemployment and achieve

more assured progress towards the inflation target," Lowe said.

     --SPARE CAPACITY

     Although employment growth remained strong, with the participation rate at

record levels, there had been "little inroad" into spare capacity and the

unemployment rate has edged up to 5.2%, Lowe said. Inflation is running at 1.3%

annually against the RBA target of between 2 and 3%, he added.

     After leaving rates unchanged for more than two and a half years, the RBA

has now lowered the official cash rate by a total 50 basis points at its last

two meetings.

     --BACK-TO-BACK

     The Bank has been open in communicating its dovish outlook since the

economy started to slow down late in 2018, and while a second rate cut was

expected by analysts, there was some disagreement as to whether it would come in

July or August.

     After the June cut, Lowe conceded that it was "unrealistic to expect that

lowering interest rates by a quarter of a percentage point will materially shift

the path we look to be on."

     --FISCAL POLICY

     The RBA is also looking to the Federal Government to enact fiscal stimulus

and issue Government bonds to fund public projects.

     Senior RBA figures have met with independent senators whose votes will be

crucial to the passage of the Government's A$158 billion tax cut package, set to

be introduced into the Parliament this month.

     Senior RBA figures have met with independent senators whose votes will be

crucial to the passage of the Government's A$158 billion tax cut package, set to

be introduced into the Parliament this month.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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