Australia lowers rates to 5.25%

Australia's central bank has cut its key interest rate from 6% to 5.25% in an attempt to boost the economy and avert a recession.

The reduction was larger than expected, with most analysts having predicted that the bank would make a half percentage point cut.

It was the third cut in as many months by the Reserve Bank of Australia.

Australia recently set out a 10.4bn-Australian dollar ($6.9bn; £4.4bn) stimulus plan to encourage growth.

"International economic data have continued to point to significant weakness in the major industrial economies, and there have been further signs that China and other parts of the developing world are slowing as well," the bank's governor Glenn Stevens said in a statement.

The move by the Reserve Bank means that the key rate is now at its lowest level since March 2005.

Treasurer Wayne Swan said banks should pass on the cut in full to borrowers to help boost the economy.

"This is the additional rate relief that Australian families and businesses need in the face of the global financial crisis," he said during a press event in Canberra.

"It will strengthen our economy at a vital time."

Worldwide, the credit crisis has led commercial banks to be nervous about lending to each other which in turn had made it harder and more expensive for individuals and businesses to borrow.

Central banks across the world have been cutting rates in recent months in an attempt to stave off recession.