By lowering the rate at which banks can refinance, the RBA hopes to bring down the cost of consumer, housing and business credit. One expert said the reduction could drive some types of mortgage rates to their lowest level in nearly 50 years. Bank of Queensland immediately cut its standard variable mortgage rate by 25 basis points to 4.45 per cent. In its statement, the RBA highlighted Australia's sub-trend growth, declining inflation and commodity prices, global uncertainty and the relative strength of the Australian dollar against its trading competitors and partners, despite a 20 per cent decline against the US dollar. "For the past year and a half, the cash rate has been stable, as the Board has taken time to assess the effects of the substantial easing in policy that had already been put in place and monitored developments in Australia and abroad," it said.

"At today's meeting, taking into account the flow of recent information and updated forecasts, the Board judged that, on balance, a further reduction in the cash rate was appropriate. "This action is expected to add some further support to demand, so as to foster sustainable growth and inflation outcomes consistent with the target," the bank said. The easing has been widely expected, being priced at close to a 70 per cent possibility in the futures markets. Nonetheless, the Australian dollar immediately lost about US1.5¢, to a new five-and-a half year low around US76.60¢. Economists immediately started pricing in a second 25 basis point cut, perhaps as early as next month.

"The tone of the statement is quite dovish, with obvious concern for underlying growth in domestic demand," said ANZ chief economist Warren Hogan. "Our initial reading is the RBA could well follow up today's move in March and it therefore does raise the possibility, at least for market expectations, of a cash rate below 2 per cent this year." CoreLogic RP Data's head of research Tim Lawless said the decision could take the typical standard variable mortgage rate down to 5.7 per cent, and the discounted variable rate to 4.85 per cent, the lowest cost of mortgage debt since July 1968. Mr Lawless said: "Lower mortgage rates have the potential to add some fuel to what are already strong housing market conditions. "However, the stimulus from lower rates may not be as influential on housing market conditions as what we have seen in the past," he said.

"Lower consumer confidence, stricter serviceability requirements for borrowers, tighter lending conditions for investors, affordability challenges and low rental yields are all factors that may contribute to the moderation in housing market conditions over 2015." More to come...