The rate cut delivers someone with a $300,000 mortgage a saving of $40 a month. Ahead of the RBA's decision,Prime Minister Scott Morrison called on the nation's banks to "do the right thing" and pass on any cut in full.

ANZ group executive Australia retail&commercial Mark Hand said the RBA's decision highlighted the significant impact the coronavirus outbreak was having on the global economy."While there were a range of factors considered in making this decision,ANZ is prepared to play its role in supporting both our customers and the broader economy through this period of uncertainty,"he said.

NAB chief customer officer consumer banking Mike Baird said the bank's decision to pass on the quarter of a percentage point cut across its variable home loan products would support households and encourage cashflow into the economy.

"In making these decisions,we have had to consider the unprecedented challenges of the low interest-rate environment and impacts of the bushfires and coronavirus outbreak on our customers and the broader economy,"he said.

The RBA's move follows thesell-off on global equity markets in recent days and growing concern the virus outbreak will have a deep and long-term impact on the economy.

TheOrganisation for Economic Co-operation and Development overnight downgraded its forecasts for global and Australian growth. It believes if the virus is contained,global growth will slip by half a percentage point. Australia will be one of the worst hit economies in the world,with growth here tipped to be 0.5 percentage points lower.

Markets had been expecting the quarter of a percentage point cut. They believe the RBA will have official rates at 0.25 per cent by the middle of the year.

The bank has previously signalled that at 0.25 per cent it will start considering quantitative easing measures.

CoreLogic's head of research,Tim Lawless,said the bank's move was driven by the downside risk of the coronavirus outbreak on the economy and household sentiment.

"Lower interest rates would normally be a catalyst for an acceleration in housing demand and value growth,however,there is less certainty that this will add fuel to the housing market in the current economic climate,"he said.

"This is partly because the latest rate cut is unlikely to be fully passed on to mortgage rates. Furthermore,a low cash rate coupled with concerns around the global spread of coronavirus has the potential to spook consumers and drag confidence lower."

The bank's move followed the release of weaker than expected data on the export sector and government spending.

The Australian Bureau of Statistics reported the nation's current account surplus narrowed by 85 per cent in the December quarter to $1 billion.

ABS chief economist Bruce Hockman said it was the third consecutive current account surplus,but the big drop meant net exports would add only 0.1 percentage points to the December national accounts.

"Falling prices for bulk commodities and a decrease in non-monetary gold volumes drove the smaller current account surplus for this quarter,"he said.

Markets had been expecting net exports to contribute at least 0.2 percentage points to the national accounts.

Government spending data,also released by the bureau,showed general government spending up by 0.7 per cent in the quarter. This is tipped to add 0.1 percentage points to growth. Many economists had been expecting a bigger contribution to growth from the government sector.