The Reserve Bank of Australia surprised punters on Melbourne Cup day by cutting interest rates for the first time in more than two years.
The Australian central bank eased its benchmark interest rate by 25 basis points to 4.5% on Tuesday.
Governor Glenn Stevens says concerns about inflation and subdued domestic economic growth were behind the decision.
He also suggested businesses and households may still be rattled by recent volatility on financial markets, despite the bailout deal sealed by European Union leaders last week.
The Australian dollar fell half a cent on the news to US$1.04.
Analysts were having a bet each way as 16 out of 27 economists surveyed by Bloomberg tipped the result.
The remainder expected the RBA would leave rates unchanged.