After leaving rates on hold at their March meeting, Tuesday's cut extends the Reserve Bank's aggressive approach to dealing with the financial crisis, which has seen rates drop a record four and a quarter percent since September 2008.
Reserver Bank Governor Glenn Stevens said the decision to cut rates further comes as new figures indicate the global economic slowdown is set to hit Australia and other world economies much harder than first predicted in the coming months.
"Recent information from abroad indicates that the contraction in the global economy continued during the first few months of this year, and most assessments of the near‑term outlook have been further marked down."
He added that while there has been a slight recovery in economic indicators in the last couple of months, the general outlook was a for a downward trend across most world economies for the rest of 2009.
"There are tentative signs of stabilisation in several countries, including China, though it is too early yet to judge how durable these will prove to be."
The RBA's decision is the latest move aimed at keeping the Australian economy out of recession, following a 0.5 per cent contraction during the December quarter.
It follows on the back of the Rudd government's second stimulus package aimed at boosting consumer spending by offering $900 cash payments to millions of Australians.
"The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead." Mr Stevens said.
The news comes on the same day that mining giant Rio Tinto slashed 705 jobs from it's Queensland operations in Gladstone and Weipa, in a further sign that the unemployment will surely continue to rise.
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Statement from the RBA
Rio to cut 500 jobs in Gladstone
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