Relief as RBA cuts rates by 25 basis points

The Reserve Bank has cut the official cash rate to 4.25% following its December monetary policy meeting.

The decision will be particurlarly welcomed by the depressed parts of the economy including the housing sector, construction and retailing, which were hopeful of some assistance prior to Christmas.

The rate cut, provided it is passed on by the banks, should help stimulate the housing market and demand for mortgages.

The Melbourne Cup Day rate cut (0.25%) helped drive an 18.4% increase in mortgages processed by AFG mortgage brokers.

Before the announcement, the dollar was trading at around $1.027. Since the announcement it dropped to $1.02.