Australia cuts interest rate to record low 2.75 pct

Australia's central bank cut interest rates to a record low of 2.75 percent Tuesday, citing weak domestic inflation coupled with a persistently high dollar as investment in the key mining sector hits its peak, AFP reports. The Reserve Bank of Australia's shock decision to slash 25 basis points takes the official cash rate to never-before-seen lows, and is aimed at priming those areas struggling as the economy transforms away from mining. "With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years," said RBA governor Glenn Stevens. "(The bank) judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target." The Australian dollar slumped to US$1.0184 from $1.0238 immediately prior to the bank's meeting, where it had been widely expected to leave rates on hold at their financial crisis low of 3.0 percent, reached in December. Stevens said inflation was currently running "lower than expected", with the exchange rate, on the other hand, "little changed at a historically high level over the past 18 months". "(That) is unusual given the decline in export prices and interest rates during that time," he said. "Moreover, the demand for credit remains, at this point, relatively subdued." It comes as the Australian government downgraded its annual revenue forecasts Tuesday, warning income had plunged Aus$17 billion due to a China-driven commodity slowdown and pressures from the dollar.