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UPDATE 12.35pm: Homebuyers and small businesses have been delivered an early Christmas present by the Reserve Bank which has cut official interest rates by a quarter percentage point.

Following its last meeting of the year, the bank today decided to slice the cash rate to 3 per cent.

The Bank of Queensland was the first to respond to the RBA's move, cutting its variable interest rates by 0.2 percentage points, less than the central bank's rate cut.

BOQ will cut its standard variable home loan rate to 6.51 per cent from December 21, chief executive Stuart Grimshaw said.

Online lender ING Direct passed on the full RBA cut and reduced its variable mortgage rates by 25 basis points, with the change coming into effect on December 24.

But none of the four major banks have moved their variable mortgage rates yet.

ANZ will hold its monthly rate review meeting on Friday, December 14.

If passed on in full by the nation’s banks, the cut will shave about $46 a month from a $300,000 mortgage.

It is the first time since early October 2009 that the Reserve has taken official rates to three per cent.

At that time, the cash rate was at a 50-year low with the economy was in the early stages of recovering from the Global Financial Crisis.

The three percent rate setting was described by the Reserve as an “emergency” level.

Bank governor Glenn Stevens said today that while there were some positive signs out of China, Australia’s biggest export market, domestic conditions were tough for those outside of mining.

The jobs market was softening, unemployment was pushing up, which would help keep inflation in check.

He said while monetary policy was accommodative, there was scope to ease cost pressures further.

“There are signs of easier conditions starting to have some of the expected effects, though the exchange rate remains higher than might have been expected, given the observed decline in export prices and the weaker global outlook,” he said.

“While the full effects of earlier measures are yet to be observed, the board judged at today’s meeting that a further easing in the stance of monetary policy was appropriate now.

“This will help to foster sustainable growth in demand and inflation outcomes consistent with the target over time.”

Mr Stevens said private spending was likely to improve but it would not match the levels seen before the GFC.

There were some signs of an improvement in the housing market but they were only tentative.

Treasurer Wayne Swan described today's rate cut from the Reserve Bank as the early Christmas present that hard-working Aussies deserved.

"We understand that not everyone out there ... is on easy street,” he said.

"But having much lower interest rates, than we have had particularly under the Liberal party, is a big win for Aussie families around Christmas time."

The Australian Chamber of Commerce and Industry's chief economist Greg Evans urged banks to cut their lending rates, saying the RBA had sent a clear signal that the economy needed a stimulus.

"We have also seen in recent times, some banks providing the benefit of easing to housing loan customers alone, and only doing the same for business customers after a considerable delay,” he said.

"Clearly, that is unacceptable and frustrates the RBA's intention to help out the weakest parts of the economy. It also adds to uncertainty."

Also weighing on the overall economy is the Gillard Government’s press to bring the Budget back into surplus.

New figures from the Australian Bureau of Statistics showed Government consumption fell by 0.4 per cent in the September quarter with public investment down by 8.2 per cent.

Combined, they will shave about half a percentage point from tomorrow’s September quarter GDP result.