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Finance
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2001-12-05 19:53:00-05
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Down Under drops Interest Rates
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Rates drop to the lowest level since 1972 as Australia avoids recession that has engulfed Japan and the US
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Things in the southern hemisphere seem to be rolling along smoothly as Australia cut its interest rate to 4.25 percent. The interest rate cut is the sixth this year and brings down the interest rates to their lowest level since 1972. Strengthened by a cheap currency, strong prices for some export commodities and a domestic housing boom, most experts think the Australian economy will grow this year by 2 to 2.5 percent and more than 3 percent in 2002. The predictions were confirmed by the Australian Bureau of Statistics, which said that the economy grew 2.5 percent versus the same point last year and 1.1 percent from the June quarter. Reserve Bank of Australia governor Ian Macfarlane said in a statement that although international economic conditions remained weak, the risk of a meltdown since September 11 appeared to be receding. Rising share prices, a drop in oil prices and the rapid easing of monetary policy in major countries all point to conditions for recovery, Macfarlane said. Macfarlane said the Australian economy had grown at an annualized rate of about 3 percent so far in 2001 and continued growth in the housing and construction sector would help short-term growth. The interest rate cut of a quarter of a percentage point was to isolate the Australian economy from global weakness. Observers said a larger increase a half-percent might lead to an overheating of the Australian economy in certain sectors. Some observers said there was a chance that there would be one more rate cut of a quarter of a percentage point in early 2002. The Australian dollar after hitting a record low of 47.75 US cents in April, has recently traded at 51.35 US cents.
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