The Reserve Bank of Australia (RBA) has shocked economists by cutting the official cash rate 25 basis points to 2.75 per cent.
Explaining the decision, RBA Governor Glenn Stevens says the cut is appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.
He says the global economy is likely to record growth a little below trend this year, before picking up next year.
Mr Stevens says growth in Australia has been a bit below trend in 2013 and that although unemployment has increased slightly, the jobless rate remains relatively low.
The RBA notes the euro remains in recession and China’s growth is running at a more sustainable but robust pace.
It says commodity prices have moderated a little in recent months though they remain high by historical standards.
