Treasurer Joe Hockey has urged Australian households and businesses to borrow and invest money ahead of a "terrific" second budget, following the Reserve Bank's decision to cut the cash rate to a new record low of 2 per cent.

But Mr Hockey has warned superannuants they face "potentially many years" of lower returns because of lower rates.

In its statement, the RBA acknowledged some ongoing weakness in the economy such as low capital expenditure by business, though it also acknowledged "improved trends in household demand over the past six months and stronger growth in employment".

The Australian Industry Group said the decision recognised "the fragile state of our economy", while the Housing Industry Association said the decision would, it believed, "reignite business investment more broadly".