PM says rate cut will help build confidence

Prime Minister Tony Abbott concedes that an interest rate cut is not good news for everybody, but he believes it will help build confidence.

The Commonwealth Bank was the first of the big four banks to cut their standard variable mortgage rate on Wednesday, in line with a 25-basis point reduction in the Reserve Bank’s cash rate to 2.25 per cent.

Mr Abbott says the cut in rates, lower petrol prices and a drop in power prices are a result of his government scrapping the carbon tax, and will lift confidence and strengthen the economy.

He understands that lower interest rates are not necessarily good news for self-funded retirees, but believes they also want to see a strong economy.

‘The great thing about older Australians is that they have our nation’s interests at heart,’ Mr Abbott told Macquarie Radio on Wednesday.

‘I think whatever the impact might be on their personal finances, they want to see our country well managed, they want to see the economy strong.’

Tuesday’s rate cut by the RBA was the first in 18 months, citing the prospect of economic growth being below trend for longer than expected and a higher peak in the unemployment rate.