Australia's Reserve Bank's has announced a bigger than expected rate cut of three-quarters-of-a-percentage point.

The cut takes the official rate to 5.25 per cent.

In a statement, the bank's Governor Glenn Stevens says data has pointed to significant weakness in the major industrial economies, and there are more signs of slowing in China.

He says the deteriorating international conditions and falling commodity prices will have a dampening influence on Australia and it appears likely that local spending and activity will be weaker than earlier expected.

The statement says the board decided that a further significant reduction in the cash rate was warranted, and it will continue to monitor developments and make adjustments as needed to promote sustainable growth

The Australian treasurer, Wayne Swan, says the rate cut is a relief for Australian families and businesses.

"What it means is that both the Reserve Bank and the government are absolutely determined to strengthen our economy in the face of changing international conditions, that's what it shows," he said.

"We now have fiscal policy and monetary policy working in tandem."

Most economists had been expecting a half-of-a-percentage point rate cut

The surprise move follow's last month's shock one-percentage point fall.

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