The Reserve Bank of Australia (RBA) announced on Tuesday it will drop the official interest rate to a record low of 0.50 percent, citing the coronavirus outbreak as the main reason behind the decision.
Markets were broadly pricing in the 25 basis point cut, with a torrid past week for global shares prompting observers to revise their predictions and bring forward the likelihood of a reduction.
"The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected," RBA Governor Philip Lowe said in a statement following the decision.
"It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path."
Other central banks are also expected to deliver stimulus measures in response to the virus outbreak, which Lowe said would help to ease the burden.
"Policy measures have been announced in several countries, including China, which will help support growth," Lowe said.
He added that, once the virus spread had been contained, "the Australian economy is expected to return to an improving trend."
Earlier in the day, Prime Minister Scott Morrison told reporters that he would expect Australia's banks to "do the right thing," and pass on the interest rate cut to consumers.
"The government would absolutely expect the four big banks to come to the table and to do their bit in supporting Australians as we go through the impact of the coronavirus," Morrison said.
Meanwhile, the Australian dollar was hovering at its lowest point in over a decade and at the time of the RBA's decision it was buying 65.62 U.S. cents.
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