Adam Carr, Senior economist, ICAP Australia. Pleasantly surprised. I think it’s a very good step in dealing with the financial crisis. We had a restrictive monetary policy setting which is completely inappropriate for what is going on in the world. They’ve acknowledged that and dealt with it which is good. As to whether we get any more, I’m inclined to think probably not at this stage, but everything depends on the evolution of the credit crisis. If funding pressure remain intense or there are further financial failures then of course there will be more rate cuts. I think what the RBA is trying to do is to frontload interest rate cuts. The idea is that if things improve then they can just leave things as they are without further cuts. It’s a really good signal, too. There were growing concerns that the RBA was a little too focussed on inflation and I think that they’ve eaten humble pie from what they were doing earlier in the year and are now focusing on the job at hand.
Josh Williamson. Senior Strategist TD Securities. Wow. It’s a huge move, the largest since May 1992. It just shows you how much things have changed since the September cut. At 25 basis points, it was a neutral statement. But a 100 basis point cut today just shows you how much things have changed and that the RBA thinks it needs to act preemptively to make sure that the worst of the latest round of the credit crisis doesn’t hit our shores. I’m surprised by how aggressive they have been. The market expected 50 basis points and I think it was spot on with that. We do have low unemployment, the RBA has previously mentioned the strong terms of trade, we look like the best OECD nation in terms of weathering the fallout from the credit crisis, but despite these things, the fact that they have gone 100 points is a huge surprise. There are two ways you can look at this. One is that the Australian economy is not as resilient as we thought. Or two, this a preemptive strike by a central bank keen to send a clear message to households and businesses.
Michael Knox, Economist and Director of Strategy at ABN AMRO Morgans. It was certainly more than the market expected. The leading indicators of the Australian economy show it is deteriorating, so it is a firm response to the deteriorating national and international conditions. I’m interested to know what might be going on behind the scenes. Is this just a part of a round of rate cuts by central banks including the Fed, the ECB and Bank of England? I think we will know more than that in about 24 hours. The size of this suggests it might be a part of a coordinated response. I think they are acting pre-emptively.