On Monday, Treasurer Josh Frydenberg said "we do expect" the banks to pass any cuts on in full - but experts warn that's unlikely as margins get squeezed the closer rates go to zero.
In other currencies, the Australian dollar rose 0.3% against the USA dollar to US$0.6986 AUD= after the RBA lowered interest rates by 25 basis points to a record low of 1.00%, matching economists' expectations.
Over the past month, we've seen RBA members hint at further cuts still to come but governor Philip Lowe has been a tad bit coy as of late about the whole situation as we approach the meeting today.
Immediately following the release of the RBA's statement at 2:35 pm (AEST), the local currency was buying 69.70 US cents.
The move comes as central banks around the world shift to a more accommodative footing as the global economy stutters in the face of trade uncertainty.
The Australian Bureau of Statistics reported that the seasonally adjusted number of building approvals rose 0.7% in May, whereas analysts had predicted no change. Yet the governor left his options open in the event further support is needed.
According to Canstar group executive of financial services, Steve Mickenbecker, "It would not be surprising to see banks only partially pass on the next cut to borrowers".
The Australian central bank lowered its official cash rate to a record low 1.00% on Tuesday, down from 1.25% after the cut in June, as policy makers underscored the U.S.
"In the Board's judgement, the easing of monetary policy last month and this month will help promote our collective welfare", he said.
National Australia Bank will also reduce its variable home loan rate by 0.19 percentage points while Westpac will cut its rate by 0.20 percentage points.
So far, the conservative government of Prime Minister Scott Morrison has played down the need for stimulus, instead reaffirming a political commitment to budget surpluses.
AMP Capital economist Shane Oliver said the Reserve Bank would have made today's cut in a bid to lower unemployment, boost wages growth and push inflation back to target.
Australia's jobless rate is now at 5.2 per cent while the RBA believes it needs to fall to at least 4.5 per cent. Price growth has largely stayed below the bottom of the central bank's target inflation range of 2-3% for the past few years.
Lowe has also broken with tradition recently to openly call for more government spending on infrastructure as urgent support to an economy running at its slowest pace in a decade.
"Consumption growth has been subdued, weighed down by a protracted period of low income growth and declining housing prices", Lowe said.
"Should the rate cuts be passed on, this will lower mortgage rates to make housing more affordable, and subsequently give the property market a nudge in the right direction", she said. "It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target".