RBA cuts interest rates to record low

Although widely expected, this is the RBA's first rate cut since August 2016. 

In his post-meeting statement, RBA governor Philip Lowe explained that the cut is forecast to help make further inroads into the spare capacity in the economy.

"The board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," Mr Lowe said. 

He explained that although global financial conditions remain accommodative, long-term bond yields and risk premiums are low. 

"In Australia, long-term bond yields are at historically low levels. Bank funding costs have also declined further, with money-market spreads having fully reversed the increases that took place last year," said Mr Lowe.

"The Australian dollar has depreciated a little over the past few months and is at the low end of its narrow range of recent times."

The central scenario remains for the Australian economy to grow by around 2.75 per cent in 2019 and 2020, supported by increased investment in infrastructure and a pick-up in activity in the resources sector, he affirmed. 

However, the main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low income growth and declining housing prices.

Mr Lowe also reflected on the recent inflation outcomes, which have been lower than expected and suggest subdued inflationary pressures across much of the economy.

"Inflation is still however anticipated to pick up, and will be boosted in the June quarter by increases in petrol prices," he stated. 

"The central scenario remains for underlying inflation to be 1.75 per cent this year, 2 per cent in 2020 and a little higher after that."

Mr Lowe concluded that the board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy.