The Wire

The reserve bank has today taken the unexpected step of reducing official interest rates by half a percent, surprising most economists who predicted only a 0.25 percent cut. The cut signals that the reserve bank is intent on stimulating economic activity in those parts of the economy, like retail, that have shown little life in recent months. But some economists say that the government is working at cross purposes to the reserve bank.

The government is intent on slashing its spending to return its budget to surplus, sucking life out of the economy at the same time as the reserve bank is trying to kick-start the economy.