The cut to 4.25percent was confirmed at Tuesday's Reserve Bank board meeting.

The drop was the fourth in a row and the new rate is the equal lowest since records began 18 years, matching the official rate in December 2001.

The Reserve Bank has chopped 3 percent from its rate since September this year.

Major lenders, including the Commonwealth Bank and the National Australia Bank, passed on the full rate cut, while Westpac lowered its standard loan rate by 80 basis points.

In his statement following the announcement, Reserve Bank governor Glenn Stevens said fragile financial markets that resulted from weak economic conditions in major countries strongly influenced the decision.

He also said the recent spending measures announced by the Government, and a large fall in the Australian dollar exchange rate, had begun to take effect and would support demand into the new year.

Russell Williams from McGrath Estate Agents Cronulla said it was a ``sensational'' opportunity to get into the market, especially when combined with first-home buyer incentives.

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T his week's latest rate decrease will save borrowers about $193 per month on an average $300,000 loan over 25 years if banks pass on the full 1 percent cut.

The state's peak business group, the NSW Business Chamber, said the official rate cut was welcome news, but the real test would be how quickly and how much of the cut was passed on to homeowners and businesses by the banks.

``While the cash rate has come down sharply in recent months, the full benefits have not been passed onto business,'' NSW Business Chamber CEO Kevin MacDonald said.