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INTEREST rates have fallen to a new low today after the Reserve Bank of Australia cut rates by a quarter of a percentage point - down to 1.5%. 

In statement the RBA said an economic slowdown in China was partly behind its decision to lower rates, in a renewed effort to stimulate investment in the Australian economy. 

"Actions by Chinese policymakers are supporting the near-term growth outlook, but the underlying pace of China's growth appears to be moderating," the statement read. 

"Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years."

The RBA also said inflation remained low - meaning a reduction in interest rates would be less likely to cause it to increase and devalue the Australian dollar. 

"Recent data confirm that inflation remains quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time," the statement read. 

Meanwhile the housing market - a sector which Australia's monetary policy makers have previously identified as vulnerable to overheating should interest rates be cut - is said to be easing off. 

"Growth in lending for housing purposes has slowed a little this year," the Bank said.

"All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished."

It will become clear over the next few days how much of the interest rate cut the banks will pass on to consumers and how much they will keep to better their bottom lines.

The Commonwealth Bank has become one of the first to move announcing it will hold back 0.13% of the decrease and cut its lending rate to 5.22%. 

Topics:  editors picks reserve bank australia

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