TWEET TALK: Rates reaction

Economists have welcomed the Reserve Bank's 25 basis point cut to the cash rate, while others will appreciate the lesson in political rates history from Stephen Koukoulas.

Tweet Talk takes the best of Twitter and brings it to you. In this edition, economists welcome the RBA rate cut, and the discussion gets political.

The Reserve Bank of Australia has cut the official cash rate by 25 basis points to 3.50 per cent, citing further weakening in Europe and some moderation in growth in China as contributing to its decision.

Economists were split on the outcome of the meeting, but most have welcomed the cut. Here's a collection of their comments on Twitter.

Shane Oliver (@ShaneOliverAMP), head of investment strategy and chief economist at AMP Capital, had expected a 50 basis point cut, and said the RBA has more work to do, given banks are not likely to pass on the full cut to their mortgage rates.

"#RBA -0.25% citing uncertain world & modest domestic growth. Should have done 0.5%, but going in right direction" he tweeted. "Expect banks cut 0.15-0.2%."

"#RBA still has more to do. Mortgage rate needs to fall to 6% from around 7.04% currently, so cash rate will at least need to fall to 2.75%"

CommSec chief economist Craig James (‏@craigjamesOZ) praised the RBA.

"Smart RBA decision to cut by 25bp. Note that rates are only a little below their medium-term averages. In other words scope for more cuts" he tweeted.

Market Economics managing director Stephen Koukoulas ‏(@TheKouk) highlighted the political implications tweeting:

"The last time a Coalition govt presided over interest rates this low - at 3.5% - Bob Menzies was PM and Harold Holt was Treasurer!"

"Assuming banks pass on 20bps, mortgage rate will drop to 6.85%, this will be a rate not seen under a Coalition govt since 2003"

Shadow Treasurer Joe Hockey (@JoeHockey) took a different approach, targeting Treasurer Wayne Swan's post-rate announcement press conference.

"Why does Swan keep running the line about a promised surplus when RBA does not even mention it in this and last statements? All spin!" Hockey tweeted.

This prompted a response from Stephen Koukoulas who tweeted directly to Hockey:

"@JoeHockey Did you know in your lifetime, a Coalition govt has never had the cash rate this low."

He then followed up with:

"Assuming banks pass on 20bps, the Abbott family will save an extra $1,080 a year on its repayments on its $710,000 mortgage."

At the time of writing Joe Hockey had not responded.

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