There are fears Australia’s economy could be heading for a recession after the Reserve Bank slashed interest rates to a record low.

The coronavirus outbreak has spooked sharemarkets across the world, with concerns it will cause a major slowdown.

The Reserve Bank of Australia (RBA) has responded by cutting interest rates at today’s board meeting by 25 basis points to a new low of just 0.5 per cent.

It’s hoped the move will boost consumer confidence and ease pressure on the Australian economy as the virus spreads.

We’re decreasing variable interest rates by 0.25% per annum for home loan customers, as well as small business cash-based loans and overdrafts. These changes will take effect on 17 March 2020.

— Westpac Bank (@Westpac) March 3, 2020

Prime Minister Scott Morrison says the major banks must pass on the savings to their customers in full, with Westpac and Commonwealth Bank doing just that.

Investment expert Scott Phillips from The Motley Fool tells Ben Fordham this rate cut “is one of the last bullets in the RBA’s arsenal”.

“This is well and truly overdue. The RBA’s had to do all the heavy lifting over the last couple of years.

“If government and the Reserve Bank don’t work together, we really are looking down the barrel of possibly even a recession.

“The surplus is important politically, it’s important for government credibility but what’s far more important is to make sure the economy doesn’t dip into recession.”

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