Australia's central bank lowered the cash rate by 25 basis points to a record low of 1.75 percent on Tuesday, following information showing inflationary pressures were lower than expected.
Reserve Bank of Australia (RBA) governor Glenn Stevens said the global economy was continuing to grow, though at a slightly lower pace than earlier expected, with forecasts having been revised down a little further recently.
"While several advanced economies have recorded improved conditions over the past year, conditions have become more difficult for a number of emerging market economies," Stevens said.
He noted commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years.
"Australia's terms of trade remain much lower than they had been in recent years," Stevens noted.
"Sentiment in financial markets has improved, after a period of heightened volatility early in the year."
Stevens said the Australian economy was continuing to rebalance following the mining investment boom.
"GDP growth picked up over 2015, particularly in the second half of the year, and the labour market improved," Stevens explained.
"Indications are that growth is continuing in 2016, though probably at a more moderate pace."
The Australian dollar fell more than one cent following the decision.
Some market analysts had predicted the RBA would hold off making a cut to interests rates until the Q2 inflation print was released in July and instead take a much more dovish stance in the accompanying statement to jawbone the local unit and spur inflation.