The Reserve Bank has cut the official cash rate to a new record low of 0.75 per cent.
The move was widely tipped by economists on the back of lower than expected economic growth figures last month.
The rate cut, if passed on by the banks will save those on an average mortgage of $400,000 around $57 a month.
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But experts say it’s unlikely the banks will pass on the cut in full.
In a statement, RBA Governor Philip Lowe highlighted the economic figures last quarter, but noted things were starting to look up.
“A gentle turning point, however, appears to have been reached with economic growth a little higher over the first half of this year than over the second half of 2018.
“The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some established housing markets and a brighter outlook for the resources sector should all support growth.”
But the RBA has warned that household spending has not picked up as much as expected on the back of rate cuts in June and July as well as tax cuts.
It also noted that Australia’s unemployment rate was still higher than it should be despite strong jobs growth.
The RBA also warned that wages growth remain subdued.
“The Board took the decision to lower interest rates further today to support employment and income growth and to provide greater confidence that inflation will be consistent with the medium-term target.
“The economy still has spare capacity and lower interest rates will help make inroads into that.”
Experts are tipping another rate cut before the end of the year, likely in December.