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FILE PHOTO: People wearing face masks walk by Flinders Street Station after cases of the coronavirus were confirmed in Melbourne, Victoria, Australia, January 29, 2020. Photo by Andrew Kelly/Reuters

Australia cuts interest rate to record low to fight novel coronavirus impact

CANBERRA, Australia (AP) — Australia’s central bank on Tuesday cut its benchmark interest rate by a quarter of a percentage point to a record low of 0.5% in response to the economic shock of the new coronavirus.

The reduction at the Reserve Bank of Australia’s monthly meeting is the first since October and the fourth since June. It was announced hours before financial leaders and central bank governors of other major industrial nations planned to hold a teleconference to discuss ways to confront the crisis.

Reserve Bank Governor Philip Lowe said his board took the decision to “to support the economy as it responds to the global coronavirus outbreak.”

“The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected,” Lowe said in a statement.

Before the COVID-19 outbreak, the slowdown in the global economy that started in 2018 appeared to be coming to an end, he said.

“It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path,” Lowe said.

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The Organization for Economic Cooperation and Development on Monday forecast that economies “strongly interconnected with China” such as Australia would suffer most the virus-linked global downturn. The OECD forecast that the COVID-19 outbreak will reduce Australian economic growth by half a percentage point to 1.8% this year.

Lowe said last year he wants to use rate cuts to get the economy growing fast enough to push the unemployment rate down to 4.5%. The jobless rate currently sits at 5.3%.

Australia’s central bank is the first after the People’s Bank of China to ease monetary policy to counter the fallout from the viral outbreak and it comes as financial leaders and central bank governors prepare to discuss similar measures later Tuesday, noted Shane Oliver of AMP Capital.

Others, “including the Fed are all heading in the same direction,” he said in a commentary.

Rates already are so low that some Australian’s will be paying the lowest mortgage rates since the early 1950s, he said.

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