Pundits, experts, and economist’s alike all predicted that the Reserve Bank of Australia (RBA) would today cut interest rates, but by a whole percentage point (100 basis points) is quite dramatic.

The cash rate now stands at 6%, down from 7%, with some predicting that rates may even fall to 5% in 2009.

Worldwide stock markets have been chaotic this week, with no one immune (the Russian market fell by 19%), although news of the RBA’s cut has created a positive surge in our index.

Quite simply there is a gridlock in the credit markets – very few institutions are lending, thus borrowing has ground to a halt.

To keep the economy moving in Australia, it is essential that our banks pass on the RBA’s commendable and brave “gift”. Whilst many financiers around the world have seen the trust in them dissipate in just a few short months, Marquette Turner maintain that whilst not completely immune, Australian lending culture will not be dented quite as much as many others, although there is no escape from the inevitable tightening of the lending reigns.

Therefore, so long as our banks quickly pass on the cut and allow sensible lending, smart investors will be in a position to take advantage of the opportunities that will present themselves in any form of market – recession or not.

Michael Marquette

MORE INFORMATION: Read the RBA Governor’s statement Read our press release

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