Australia's central bank cut its benchmark interest rate by a quarter of a percentage point to a record low 2.5% today because of slower growth and weakening commodity prices.
The Reserve Bank of Australia's decision at a monthly board meeting in the first week of a federal election campaign was expected by economists.
The bank last cut the official cash rate, which is a benchmark for commercial lending rates, by a quarter point in May, following four cuts in 2012.
The bank's governor Glenn Stevens said economic growth was below the long-term trend level of 3% as the economy adjusts to lower levels of mining investment, but there was a "reasonable prospect" of it picking up in 2014.
Australia has enjoyed a decade-long boom in mining and related construction that helped it avoid recession during the global financial crisis. Growth, however, is now slowing as China's economy cools and drags down prices for commodities such as iron ore and coal.
The government last week nearly doubled its budget deficit forecast for the fiscal year through June 2014 to $30.1 billion as slowing growth weighs on tax revenues.
Stevens said the Australian dollar was still quite high despite a fall of 15% since April. "It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy," he said.
The government last week downgraded its growth forecast for the current fiscal year that began on July 1 from 2.75% to 2.5%.
