The Reserve Bank of Australia has cut interest rates to an all-time low, but already economists are wondering if more will be needed to get the country's economy moving.
The RBA has cropped the official cash rate to 1.5 per cent in a bid to boost Australia's sluggish inflation rate, which at 1 per cent is at a 17-year low and well outside the bank's desired 2 to 3 per cent target band.
RBA governor Glenn Stevens said very subdued growth in local labour costs and very low cost pressures globally meant inflation was expected to remain low for some time.
"Getting inflation back in the target range and reaching a sustainable economic growth level would be improved by easing monetary policy at this meeting," Mr Stevens said in a statement.
QWest Paterson director Rowan Hemsley welcomed the RBA’s rate cut, saying it would hopefully provide potential property buyers in Western Australia with an extra incentive to enter the property market.
“Given that inflation is at its lowest rate in well over a decade and the housing market across the nation has slowed considerably, the decision to cut is no surprise,” Mr Hemsley said.
“Here in WA we particularly need measures that will entice property investors back into the market.
“The mining downturn and tighter lending criteria on housing investment loans has really taken its toll on the WA property market.
“A cut to rates may be just what is needed to give buyers confidence and take advantage of lower average dwelling values.”
LJ Hooker head of research Matthew Tiller said the rate cut would help the Perth property market with its issue of soft buyer demand.
“The cut should create a tipping point for affordability in Perth which could result in some of the current stock levels being absorbed,” he said.
“But unlike the eastern capitals, we’re still some time off seeing any across-the-board price growth in WA.”
JP Morgan chief economist Sally Auld said the RBA was reacting to weak inflation, but trying not give any indication of its next move.
"These guys have confirmed that inflation remains quite low," Ms Auld told AAP.
"That was where the cut came from and I think from here these guys sit back and wait. The next question they need to address is how persistent this period of low inflation is going to be."
Commonwealth Bank managing director of economics Michael Blythe said as the focus was clearly inflation, the Reserve Bank may not be done with one cut before the end of the year.
"I expect, as we see the RBA's inflation forecasts on Friday, they will still show inflation remaining extremely low and keep alive the prospect of another rate cut later this year," he told AAP.
"We've had two cuts in our forecast for while.
"We've just had the August one and we think there's a good chance of another one in November."
Mr Blythe noted the biggest element of the RBA's rates statement related to housing, an indication the central bank remained concerned about the potential of a rate cut to again stimulate housing prices.
"There's lot of explanation about why that's not going to happen," he said.
"We'll see I guess."
Commonwealth Bank of Australia has already announced it will pass on about half of the RBA's rate cut for mortgages but is softening the blow by hiking interest rates for some savers.
Australia's largest bank said it will reduce standard variable mortgages for owner occupiers by 13 basis points while raising its one-year deposit rate by 0.55 per cent and its two- and three-year deposit rates by 0.50 per cent.
"We've carefully considered the current environment and the needs of both borrowers and savers," CBA group executive retail banking services Matt Comyn said.
National Australia Bank also slashed its variable rate by 10 basis points to 5.35 per cent.
Westpac and ANZ had not reacted to the RBA's announcement by 3:30pm today.
By Fraser Beattie and AAP
