Reserve Bank of Australia Slashes Interest Rates

The Reserve Bank of Australia cut its official cash rate a full percentage point to 6.0 percent overnight in response to tightening domestic credit conditions and stock market volatility brought on by the global financial crisis. It was the RBA's largest cut since 1992 and stunned financial markets because of the abrupt U-turn in Australian monetary policy.

Reflecting tight credit conditions, Australia's major banks only passed on 80 basis points (0.8 of the 1 percent cut) to their variable home loan rates.

Australia's OCR cut comes later than the two in New Zealand in recent months, but the Australian cut will intensify pressure on the Reserve Bank of New Zealand to cut its OCR further.