The Reserve Bank of Australia has cut the official cash rate by 25 basis points to 1.75% for the month of May.
The official cash rate was last cut in May 2015, meaning this is the first time the rate has been slashed in 12 months.
RBA governor Glenn Stevens said in a statement the bank decided to ease monetary policy in the wake of low inflation.
“Inflation has been quite low for some time and recent data were unexpectedly low,” Stevens said.
“While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”