30 Jan 2012

RBZ rate cut expected

6:59 am on 30 January 2012

Economists expect the Reserve Bank of Australia to announce a reduction in interest rates for the third consecutive month on Tuesday.

Rates were previously cut by 0.25% in November and December last year.

Another cut would take Australia's lending rate to 4%.

However, the futures market is more equivocal, putting the odds at a little over 50%.

Australia posted an inflation rate of zero in the December quarter, but Radio New Zealand's Sydney correspondent says no-one really believes it.

The devil was in the detail. A big contributor to the zero CPI was a fall of almost 50% in the price of bananas after the Queensland floods wiped out the annual crop.

Over the full year, Australia's inflation rate was just over 3%, but that masked some divergent trends.

The prices of food, appliances, electronic goods all fell, but insurance premiums, childcare, water and sewerage, petrol and electricity all rose.