A Reuters survey showed 18 out of 21 economists were forecasting a quarter of a percentage point cut instead of a half a percentage point easing.
"Global long-term interest rates have declined to historically low levels, consistent with low expected inflation and growth rates into the future", the bank said. "Central banks are easing monetary policy to support their economies".
The central bank lowered its cash rate by 25 basis points (bps) in May as global trade frictions clouded the growth outlook, and economists polled by Reuters had predicted policymakers would cut rates again this week by a quarter of a percentage point.
This stifled investors and sent the Aussie dollar right back to levels not experienced since March 2009 when the Global Financial Crisis kicked into gear, Westpac senior currency strategist Sean Callow said.
The Aussie dropped as much as 1.2 per cent to 66.77 USA cents, breaching a low set during the January flash crash.
The dollar fell 0.3% to 106.13 yen in Asian trading, but could face further losses after 10-year U.S. Treasury yields fell to a three-year low of 1.6580%, some analysts said.
Any indications that the RBA could follow on with the RBNZ and cut rates in the near-term could substantially weaken the AUD/GBP exchange rate.
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The morphing of the Sino-US trade conflict into a currency war leaves open economies like New Zealand heavily exposed and vulnerable to global pressure.
The committee drove home its dovish message by predicting there was no chance of a hike until late 2021, a lower for longer outlook that was also recently adopted by the Reserve Bank of Australia (RBA).
New Zealand's central bank announced its second cut this year.
Hartwich says when that recession eventually comes, the country will have to cut the OCR again, and there won't be much left to cut.
Markets wagered even further cuts would be needed as central banks worldwide try desperately to head off a deeper slowdown.
Higher commodity prices helped lift the export earnings.
"There are offsetting factors that limit the downside for the Aussie", he said. -China trade war after China allowed its currency to depreciate.
"Australia's trade position is very strong right now, so it can handle a bit of damage from overseas". The economy's annual growth rate has fallen to 2.5%, the slowest in more than five years, and a further deterioration is expected.