AUSTRALIA'S central bank cut its key interest rate by a quarter percentage point to a record low 2.75 percent yesterday in an effort to boost economic growth as a mining boom cools and the strong Australian dollar erodes business profits.

Reserve Bank of Australia governor Glenn Stevens said in a statement following the bank's monthly board meeting that economic growth was below trend in the second half of 2012 and continued in 2013. Australia's long-term trend growth rate is around 3.25 percent a year.

"Employment has continued to grow but more slowly than the labor force, so that the rate of unemployment has increased a little, though it remains relatively low," he said.

"The global economy is likely to record growth a little below trend this year, before picking up next year," he said.

Australia's jobless rate rose from 5.4 percent in February to 5.6 percent in March, the highest rate in over three years.

The RBA last lowered its Official Cash Rate in December, cutting it by a quarter point to 3 percent.

The rate last bottomed out at 3 percent for six months in 2009 during the global financial crisis and recession.

Moments after the bank's announcement yesterday, the Australian dollar slid against the US dollar, dropping to US$1.0188 from US$1.02337.

Treasurer Wayne Swan had described the 3-percent rate in 2009 as an "emergency low."

But he said yesterday that Australia's economic circumstances in 2009 could not be compared with now.

The Australian dollar in 2009 was worth only 60 US cents and global demand was then plummeting.

Inflation is under control so the central bank is "in a position to deploy monetary policy, particularly when faced with the fact that we have a high dollar which in itself is a consequence of the strength of our economy," Swan said.

"One of the challenges that flows from the higher dollar and our domestic strength is the squeeze on profits for business across our economy caused by that higher dollar," he said.

Despite commodity prices falling as Australia's mining boom cools, the Australian dollar remains high due to demand for government bonds which are viewed by investors as a safe haven and have higher returns compared with US and Japanese government bonds.