Australia cuts key rate by 1 percentage point

Tuesday 7th October 2008

The Reserve Bank of Australia cut its benchmark interest rate by 1 percentage point, twice as much as economists had forecast, to help buffer the economy from a global credit squeeze.

The bank cut the rate to 6%, effective Oct. 8, Governor Glenn Stevens said in a statement.

"Financing is likely to be difficult around the world for some time ahead," Stevens said. "The recent deterioration in prospects for global growth, together with much more difficult market conditions even for creditworthy borrowers, now present the risk that demand and output could be significantly weaker than earlier expected."

Australia's S&P/ASX 200 Index rose 2.3% to 4614.9, reversing an earlier decline.

By Jonathan Underhill

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