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The Reserve Bank of Australia (RBA) this month cut the official cash rate by 25 basis points, the second consecutive rate reduction this year, marking a 0.75 per cent reduction in the cash rate since April.
The RBA’s decision to lower the official cash rate to 3.50 per cent was largely attributed to the continuing European debt crisis and poor consumer sentiment.
“Financial market sentiment has deteriorated over the past month,” RBA Governor Glenn Stevens said.
“Europe's economic and financial prospects have again been clouded by weakening growth, heightened political uncertainty and concerns about fiscal sustainability and the strength of some banks.
“[In Australia], both households and businesses continue to exhibit a degree of precautionary behaviour, which may continue in the near term,” Mr Stevens said.
Earlier this month, Australian shares hit a six-month low,