The Reserve Bank of Australia yesterday cut its interest-driving cash rate target 1% to 3.25% - a 45-year-low - as the global downturn bites harder on several fronts.
Bank governor Glenn Stevens said in a statement there was a significant deterioration in world economic conditions late in 2008 and the major advanced economies contracted sharply in the December quarter, as did a number of emerging market economies.
While China maintained growth it had "slowed markedly", he said.
"The effects on household and business confidence of the financial turmoil following Lehman's collapse, and continuing strains on major financial institutions, resulted in a significant downturn in demand around the world," he said.
The RBA took into account the massive $42 billion ($NZ53.3 billion) nation building and employment plan announced by the Government earlier yesterday.
The combination of expansionary monetary and fiscal policies now in place will help to cushion the Australian economy from the contractionary forces coming from abroad, Mr Stevens said.
