The Morrison government wants banks to pass on the benefits of the latest interest rate cut, to benefit home buyers, businesses and farmers.
The Reserve Bank lowered the cash rate to 1.25 per cent today, in an effort to keep the economy humming by helping more Australians find jobs while controlling inflation.
"The board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target," RBA Governor Philip Lowe said in a statement.
The rate, which reflects what the central bank charges commercial banks on overnight loans and influences other interests rates, has sat at a record low of 1.5 per cent since August 2016.
Earlier in the day, Treasurer Josh Frydenberg met with executives at the four big banks in recent days to urge them to pass on the benefits of a lower rate.
Borrowers with an average home loan of $400,000 would save about $58 on their monthly repayments if the cut was fully passed on.
"I expect all banks to pass on the benefits of sustained reductions in funding costs," the treasurer said.
Mr Frydenberg will address the media at 3pm AEST.
Rural Finance Minister David Littleproud said in a statement immediately after the cut was announced that banks should pass on the cut in full to farmers, many of whom are battling drought.
"The farmers who grow our food are struggling with drought and deserve the full rate cut to be passed through," Mr Littleproud said.
"Many farmers owe banks significant amounts of money and so interest rate cuts are relief to farming family budgets."
ACTU assistant secretary Liam O'Brien said the cut was necessary because of weak wage growth, stagnant household incomes, low inflation growth and slowing economic growth.
"They are asleep at the wheel, ignoring the impact that their policies are having," Mr O'Brien said of the Morrison government.