Prime Minister Kevin Rudd has welcomed the Reserve Bank's decision to cut the cash rate by 100 basis points, to six per cent, after its board meeting today.

The move by the central bank was double the 50 basis point fall economists had predicted.

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Mr Rudd told reporters in Brisbane today the decision would help maintain the stability of the financial system and see Australia through "tough times ahead".

'Extraordinary economic times'

He says Australia is dealing with "extraordinary economic times".

Treasurer Wayne Swan says the action would help the Australian economy.

"The government welcomes the relief the Reserve Bank of Australia's decision will provide to working families and Australian small businesses," Mr Rudd says.

"We are dealing with extraordinary economic times ... when some 25 banks around the world have either failed or have had to be bailed out.

"As a consequence we, in this country, are conscious of the need to take decisive economic policy action.

Stability 'paramount'

"The cornerstone of the government's policy is to ensure the continued stability of the Australian financial system.

"We believe that given the pressures which borrowers face, there should be maximum pass-through to working families and to small businesses.

"And the reason is we want to make sure that those who are currently borrowers get relief and at the same time maintaining the stability of the Australian banking system."

Mr Rudd says Australia was "not immune" to the current global credit crisis.

But he says public and private finance in Australia was "robust" in international terms.

"For example, our budget surplus circumstances, you look across the major economies of the world at the moment, practically none of them are able to boast a budget surplus," Mr Rudd says.

"And why that is important? It provides a buffer to take necessary actions in the future given the uncertainties that lie ahead."

Swan has faith in banks

Treasurer Wayne Swan says he believed banks would eventually pass on the full amount of rate cuts.

"The government expects that the banks will pass on, in full, official rate cuts when conditions normalise," Mr Swan says.

He says the government's focus was to ensure growth in a low inflationary environment.

Mr Rudd says Australia had robust financial institutions, with major banks representing 85 per cent of the country's banking system.

He says it is important to realise the difference between Australia's financial institutions and those under stress overseas.

Australian banks 'first-class'

"Australia, particularly when you look at its financial institutions, particularly when you look at the state of their balance sheets and how well they are regulated, is in first-class operating order given the extraordinary stresses and pressures which are presenting themselves across the global economy," Mr Rudd says.

"We are bringing forward a financial claims scheme that will be introduced to parliament before the end of the year.

"It's been already circulated by the treasurer out to the corporate community."

The financial claims scheme will guarantee early payment of up to $20,000 to depositors and policy holders of failed banks and insurers.

Mr Rudd says the treasurer would also attend the International Monetary Fund (IMF) meeting to discuss a consistent, strong and transparent financial regulatory system for the future.