UPDATE 2-Australia cenbank cuts rates to record-matching lows

Mon Dec 3, 2012 10:59pm EST

* RBA cuts cash rate 25 bps to 3.0 pct, matching record lows

* Says data confirm peak of resource investment approaching

* Market wagering on at least one more cut, some say 2 pct possible

* Data shows fiscal tightening bites in Q3, GDP report due Wednesday

By Wayne Cole

SYDNEY, Dec 4 (Reuters) - Australia's central bank cut interest rates a quarter point to a record-matching low on Tuesday, stepping up efforts to safeguard the rich world's most resilient economy from the risk of recession as a mining boom peaks.

The Reserve Bank of Australia (RBA) cut its main cash rate to 3.0 percent following its monthly policy meeting, bringing the easing since May to 125 basis points and matching the trough hit during the darkest days of the global financial crisis.

"While the full effects of earlier measures are yet to be observed, the Board judged at today's meeting that a further easing in the stance of monetary policy was appropriate now," said the central bank's governor, Glenn Stevens.

"Looking ahead, recent data confirm that the peak in resource investment is approaching. As it does, there will be more scope for some other areas of demand to strengthen."

Financial markets were almost fully priced for an easing given signs the seven-year old bonanza in mining investment is finally likely to crest next year, leaving a hole in growth that needs to be plugged by other sectors of the economy.

The move was so well discounted the local dollar actually firmed a quarter of a cent to $1.0445 on the news.

Yet, investors are still wagering official rates will have to go lower yet to truly stimulate demand among cautious consumers and a lacklustre housing market.

Interbank futures suggest rates could approach 2.5 percent by the middle of next year, while some economists think a floor of 2 percent is not impossible.

"There will more to come next year. Although the RBA has cut rates a fair bit, we think they'll probably have to do a bit more to help boost activity in the economy," said Spiros Papadopoulos, a senior economist at National Australia Bank in Melbourne.

Even after Tuesday's cut, Australian rates are still among the highest in the developed world.

With rates near zero in the United States, Japan and Britain, those countries have taken ever more exotic stimulus steps including buying massive amounts of government debt.

A key concern for the RBA has been a pullback in Australia's terms of trade, or the ratio of export to import prices. That has hit company profits, along with tax receipts, and led miners to pare back on their more ambitious investment plans.

As a result, the boom in mining investment is now likely to peak earlier than expected, around the middle of next year, and at a lower level.

The local dollar has also stayed high even as export prices slid, threatening currency-sensitive sectors such as manufacturing and tourism.

Recognising the risks, the RBA is trying to stimulate other sectors of the economy, and particularly home building, to fill any hole left when mining finally comes off the boil.

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