The decision of Australia's central bank to cut interest rates to 53-year low has been well received by business groups still reeling from aneamic economic fundamentals led by exports and low consumer demand.

According to Australia Ai Group Chief Executive, Innes Willox, the RBA's decision to reduce the cash rate is a timely move to stimulate the slowing economy and will be welcomed by industry, particularly in the residential construction sector and the manufacturers and service providers linked to home building.

" Alone this will not act as a silver bullet to boost demand, but it is a welcome step to stimulate economic activity. In view of the clear slowdown in the domestic economy, there are real risks that next week's Budget will further dampen business activity by excessively cutting spending or raising taxes. It is crucial that monetary and fiscal policy are aligned at this time," Mr Willox says.

The local stock market received a boost with the said decision of the central bank.

The Reserve Bank of Australia has cut interest rates to a 53-year low. Rising unemployment, weak inflation and a stubbornly high Australian Dollar were the catalyst to this decision, according to BELL FX general manager Nick White.

"The official cash rate fell to 2.75% today, making this a record low for Australia's official interest rate, which the RBA cut four times last year to jump start the nation's lacklustre non-mining economy and deflate the AUD," explains Mr. White.

The AUD fell more than half a US cent to below $US1.0200 immediately following the rates announcement, while the ASX200 reversed its decline, jumping 18 points or 0.1%, to 5174 points, data from BELL FX pointed out.

ASX Bouyant, AUD Drifts

The Australian Securities Exchange benefited from the rate cuts as investors gobbled local mining stocks, notes Mr. Ben Taylor sales trader at CMC Markets.

"It's hard to remember a meeting that has divided a market so intensely. Cutting rates to historic lows was certainly gaining more weight in the market, and the bank decided to use its power to support demand given the inflation outlook could definitely allow it. While some (including ourselves) had expected rates to be on hold, albeit with a clear signal to ease in June, it seems the RBA has looked to get ahead of the curve and not wait for the CAPEX figures on May 30. The key line though is in the last paragraph and the narative 'at today's meeting the Board decided to use some of that scope'; the emphasis falls on the word 'some', and thus not all. AUD/USD has predictably broken key support at 1.0221 and is eyeing the March 4 low of 1.0115," According to IG Markets chief markets strategist Chris Weston.

RBA Board Decision

Governor Glenn Stevens cited weak credit demand and a still unusually strong Australian dollar in justifying the decision, adding that the inflation outlook remained tame.

"The board judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target. Employment has continued to grow but more slowly than the labour force, so that the rate of unemployment has increased a little, though it remains relatively low".

"The exchange rate ... has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates," he said.