The Democratic Alliance welcomes the 50 basis point cut in the repo rate, announced this afternoon. Given our slower than anticipated recovery from recession, this provides welcome relief to heavily indebted consumers and slightly reduces the profit margins available to short term currency traders. It is unlikely, however, that the cut will significantly impact on the value of our currency. Other measures, such as a further relaxation of exchange control, would more efficiently achieve this objective.

The Governor strongly emphasised the Bank's independence and stressed that the decision was not taken to influence the currency or as a result of external influence from various role players. This is clearly a reference to perceived pressure from the Minister of Finance who has advocated for monetary policy interventions.

It is interesting to note that the bank retained its GDP growth forecast at 2.8%, while the Treasury revised its forecast to 3% in the recently revised Fiscal Framework as set out in the Medium Term Budget Policy Statement. The Bank is therefore less optimistic about our economic growth prospects than the National Treasury.

The Democratic Alliance believes that the South African Reserve Bank has come to the party by cutting the rate and that the Minister of Finance should take fiscal policy measures to complement the cut. National Treasury needs to increase the tax rebate available to pensioners to soften the impact of their steadily eroding income from interest-bearing financial instruments and needs to accelerate the development of incentives to stimulate economic activity, especially that of smaller businesses who will immediately benefit from cheaper access to capital for investment.