Economist, Opposition Urge RBA to Reduce Benchmark Cash Rates

With another round of global economic crisis looming, there is a growing call for the Reserve Bank of Australia (RBA) to cut interest rate to avoid a recession.

Among those who have asked the RBA to reduce the cash rate at economist Dr. Shane Oliver and opposition finance spokesman Andrew Robb. They are pushing for at least a 0.25 per cent cut in the benchmark lending rate from the current 4.75 per cent.

"Interest rates have to come down or we risk getting into a downward spiral where falling confidence leads to reduced spending which leads to higher unemployment. It's now starting to happen," AMP Capital chief economist Mr Oliver warned in a statement.

However, he recommended larger cuts by 50 basis points if this week would turn out to be like last week, and 100 basis points cut if panic would continue to spread throughout the market.

"There are major economic storm clouds on the horizon... Australia is very vulnerable to any major downturn around the world," The Sydney Morning Herald quoted Mr Robb.

"The first thing that will happen is that commodity prices will fall off dramatically, and when commodity prices fall off the government's budget is in total tatters.

Mr Robb, besides seeking a cut in interest rates, pushed for reduction of government spending to remove pressure on the key lending rate and to place an indefinite hold on the carbon tax.

He described the federal government's pursuit of the carbon tax measures in the present environment as an economic madness which will surely kill business confidence despite the mining boom in Australia since other sectors are in deep trouble.

The RBA has held on to the 4.75 per cent interest rates in its September meeting. The bank's next policy meeting on key lending rates is scheduled in October.