Dr Lowe said the economy had grown below trend over the past year, with household consumption "weighed down by a protracted period of low income growth and declining housing prices". While employment growth had been strong, there had been little inroads made into the economy's spare capacity, which meant overall wages growth "remains low". Loading Replay Replay video Play video Play video "A further gradual lift in wages growth is still expected and this would be a welcome development," he said. "Taken together, these labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment."

Dr Lowe said there were some tentative signs that house prices in Sydney and Melbourne had stabilised, pointing out that mortgage rates were now at record lows. But he gave no signs that this was the last cut by the RBA in this current cycle. "Today's decision to lower the cash rate will help make further inroads into the spare capacity in the economy," he said. "It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target."

The Australian dollar dipped from 69.79 US cents to 69.70 US cents following the announcement before climbing back to 69.81 US cents by 1435 AEST. Ahead of the decision, markets had put the chance of a rate cut on Tuesday at 77 per cent, with another cut priced in by February next year. If passed on in full, the quarter percentage point cut would save $58 a month in repayments on a $400,000, 30-year mortgage. Loading But analysts are sceptical about whether banks will be able to pass on all of the reduction due to the impact it would have on their deposit rates, which in many cases would approach zero.

KPMG chief economist Brendan Rynne said the move to 1 per cent put pressure on the Morrison government to consider other ways to boost the economy. "The RBA is sending a signal to the market, to politicians and to the community at large, that the Australian economy is not firing on all cylinders, and as one of the guardians of national welfare, the RBA is looking to help out where it can," he said. "So this really puts the onus on the government to bring forward fiscal stimulus – by getting new targeted infrastructure projects up and running and ensuring the proposed tax breaks are brought into law soon as possible." Loading Figures from property analysts CoreLogic this week showed dwelling values lifting in Sydney and Melbourne through June, the first increase in the two cities since 2017. However, values fell in almost every other capital city.