Any pretence that Australia is going to ride out the global economic
storm largely unscathed has disappeared in the past 24 hours, the
Sydney Morning Herald‘s main editorial says on Tuesday.

That is the
reason, says the paper, the Reserve Bank’s sharp and unexpected turn on
official interest rates is both welcome and appropriate.

“A long era of fine-tuning of monetary policy to keep inflation within a low band has ended,” says The Herald.

“Times have changed. The central bank’s governor, Glenn Stevens, has acted with boldness but his judgement is right.

“It’s also gratifying that the big four commercial banks have begun
passing on most of the 1 percentage point cut to their customers.”

The
Herald says the cut should help stabilise our markets, taking pressure
off borrowers from share owners to home buyers to state governments.

It
should also end the niggling debate among politicians about who is
caving in more to the bankers, and also end the unseemly barracking by
some media against the Reserve Bank.

The Australian’s
lead editorial says the RBA has been proactive in defending our real
economy from the fallout of the global financial crisis by slashing the
cash rate by 100 basis points to six per cent, at least double the cut
anticipated.

The paper says that former prime minister John
Howard’s observation that Australia, with a strong balance sheet, low
inflation and low unemployment, was better placed than almost any
nation in the Western World to withstand the global crisis was accurate.

“As
his government did with the Asian meltdown, the Rudd government is
proving responsible in its stewardship of the current crisis,” says The
Australian.

And in welcoming flow-on effects
to working class families and small businesses from yesterday’s rate
cuts, Kevin Rudd sensibly emphasised the imperative of maintaining the
stability of Australian banks.

The Australian Financial Review
says the greatest need right now is to restore confidence in financial
markets and get banks lending again.

“The RBA’s bold gesture
should go some way to bringing that about, especially if it is followed
by rate cuts in Europe and North America,” the paper says.

The
Fin Review adds the tumultuous events of the past seven months – in
particular the past month – have made the restoration of health credit
markets and the maintenance of economic growth the priority, and
relegated inflation to a secondary concern.”

Under the
headline “RBA scores a bullseye”, the Sydney Daily Telegraph says it
takes a lot to put global financial news in the shade at the moment,
but the Reserve Bank yesterday managed exactly that.

“With an
audacious, creative and unexpected 1 per cent cut in official rates,
the bank reinvented itself as a genuine player in our current economic
situation,” says the paper.

The bank has driven beautifully in very have traffic. Congratulations are due.”