The Reserve Bank of Australia (RBA) cut its key rate to 2.5% from 2.75%.

 

Last week, the government cut its growth forecasts and warned that unemployment in the country could rise amid slowing growth. 

 

The rate cut comes just days after Prime Minister Kevin Rudd called a general election for 7 September.

 

The state of the economy is expected to be a key poll issue, along with asylum¹ and climate change. 

 

Treasurer² Chris Bowen welcomed the move, saying that "the fact is that now, under Labor³, interest rates are at record lows".

 

"This cut means that a family with a standard mortgage of A$300,000 ($269,500 ;£175,700) will now be paying around $A500 less a month and A$6,000 less in annual payments than when the Coalition⁴ was last in office," Mr Bowen was quoted as saying by the Australian Broadcasting Corporation (ABC).

 

However, the opposition⁵ targeted the Labor party government's economic policies.

 

"There is no doubt that a reduction in interest rates is a good thing, but you have to ask yourself why are interest rates likely to be cut," opposition Leader Tony Abbott was quoted as saying by the ABC, ahead of the rate decision.

 

"If interest rates go down, it is because this government is presiding over an economy which is in much more trouble than government has previously⁶ been prepared to admit."

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