Australia cuts key rate to avert recession

Analysts, most of whom had expected a 0.75 percentage point cut, said Tuesday8217;s decision shows the bank is taking an aggressive approach in tackling the domestic fallout of a global economic downturn. The global turmoil has taken Australia from boom to the verge of recession.

The cash rate has fallen 3 percentage points since September as the central bank tries to divert cash being paid into mortgages into retail spending that will keep the economy ticking over.

In the same vein, Prime Minister Kevin Rudd has raided the budget surplus to pump more than Australian dollars 10.4 billion 6.7 billion into the economy.

Reserve Bank Governor Glenn Stevens said efforts by government and central banks to stabilize the recent turmoil in financial markets have begun to take effect.

8220;Nonetheless, financial market sentiment remains fragile, as evidence accumulates of weak economic conditions in the major countries and a significant slowing in many emerging countries,8221; Stevens said in a statement explaining the reasons for the rate cut.