The official interest rate is now 3.25 per cent. Rates were last this low in October 2009.
The 25 basis point fall is the fifth rate cut the Reserve Bank has made since November last year.
Rates have now fallen 1.5 per cent since the current cycle of easing began.
The cut comes after recent revelations that the domestic economy is slowing and amidst renewed fears for the health of the global economy.
The Reserve Bank faced a mixed bag of data when it met today including cooled commodity prices and state and federal budget cuts on the horizon.
“Many economists had been predicting one or two rate cuts by the end of the year,” says Domain property expert Carolyn Boyd.
“Everyone was expecting a move on Melbourne Cup day, citing the fact that the Reserve Bank has moved up or down on the last six Melbourne Cup days. The central bank opted instead to step in today to stimulate the economy.”
When the Reserve Bank next meets it will have the benefit of the September quarter inflation data, which is due out on October 24.
Each 0.25 per cent drop in interest rates slices about $60 off the monthly interest cost of an average Australian mortgage.