The cut is the second in consecutive months. Previously the Reserve Bank of Australia had not shifted the rate in almost three years.

"This easing of monetary policy will support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," Reserve Bank Governor Philip Lowe said in a statement.

The outlook for the global economy remained reasonable. But uncertainty generated by the trade and technology disputes was affecting investment and meant that the risks to the global economy were tilted to the downside, Lowe said.

The changes were widely expected after Lowe said in May that inflation was likely to remain below the bank's target range of 2% to 3% a year and that a decrease in the cash rate would likely be appropriate.

The bank's board moves interest rates at monthly meetings to keep inflation within the target range. Inflation is currently running at 1.3%. Lower rates are a boon for borrowers and can help stimulate more business activity.

The bank wants Australia's jobless rate to fall below 5.2% so wages can rise faster.

With Parliament sitting on Tuesday for the first time since May elections, the government is giving priority to passing tax cuts worth 158 billion Australian dollars ($110 billion) over the next decade to boost economic activity.

Before the June change, the cash rate last moved in August 2016, when it was reduced by 0.25% to 1.5%.

The rate has not been increased since November 2010, when it rose 0.25% to 4.75%.

Australia's economy is suffering from the end of a mining boom — largely to supply China— that carried the country through the global economic crisis without a recession. Australia has not suffered a recession, which is defined as two consecutive quarters of economic contraction, since the June quarter of 1991.