The Reserve Bank of Australia has taken its foot off the monetary policy brakes with its first reduction in the official cash rate in 2½ years.
Radio New Zealand's Sydney correspondent reports the rate cut on Melbourne Cup Day was not a surprise.
But there's debate whether this will be the first of a series or a one-off.
The crisis in Europe, slowing domestic growth and the lowest core inflation result in 14 years combined to convince the Reserve Bank to lower its target cash rate by 25 basis points to 4.5%.
It was the first easing of the cycle and followed a year of steady rates, which in turn followed a one-year tightening cycle.
According to one view, the RBA has merely moved rates back to neutral and with productivity growth poor, will be in no hurry to ease again.
But others say threats to the economy are building and the bank will go in for a second round before Christmas.
Retail banks were quick to pass on the reduction in the official rate.
Radio New Zealand's correspondent reports they were under strict orders to do so by the federal government.
Meanwhile, domestic banks are having a run of sound earnings results.
Best of the lot was Westpac, which announced a record annual cash profitof $A6.3 billion - up 7% on a year ago.
Less stellar was ANZ, whose $A2.7 billion second-half profit came in short of estimates and was affected by the instability in markets of recent months.
Radio New Zealand's correspondent says the big worry for Australian banks now is that with credit growth slowing and regulatory costs rising, their 'AA' credit ratings may be at risk.
