Australia cut its benchmark interest rate to a record low on Tuesday, putting its central bank among the first in the world to ease policy to fight the economic fallout from the coronavirus. This was the fourth reduction by the Reserve Bank of Australia (RBA) in less than a year, bringing the cash rate to 0.5% amid mounting evidence momentum in the A$2 trillion ($1.30 trillion) economy has stalled.

In a short post-meeting statement Governor Philip Lowe said the coronavirus epidemic was having a "significant" hit on Australia's economy and that it was difficult to predict how large and long-lasting the effects will be.

The Board "will continue to monitor developments closely and assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy," Lowe added. Only two economists polled by Reuters last week expected the RBA to cut rates but market turmoil driven by growing pandemic fears shifted expectations, prompting as many as 17 of the 40 polled to swing to predict an easing by Monday.

Markets had also swung wildly in recent days to price in a move amid speculation policymakers would have to act to steady market panic over the virus. Indeed, some speculators had wagered the RBA would cut by more than 25 basis points and were forced to cover short positions in the Aussie on the decision. That pushed the local dollar up from a recent 11-year trough to $0.6559. Financial futures imply the next move to 0.25% by June at which point policymakers are also expected to launch quantitative easing for the first time in Australia.

The virus outbreak is plunging the world economy into its worst downturn since the global financial crisis more than 10 years ago, the Organisation for Economic Cooperation and Development warned on Monday, urging governments and central banks to fight back to avoid an even steeper slump.

Finance Ministers of the Group of 7 advanced economies and their central bank governors will hold a conference call later in the day to discuss measures to deal with the virus and its mounting economic toll.