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CANBERRA, Dec 4 AAP

December 04 2012, 5:51PM

Treasurer Wayne Swan has conceded economic growth is moderating, taking some of the gloss off another cut in official interest rates billed by the government as an early Christmas present for households.

The Reserve Bank of Australia (RBA) on Tuesday cut the cash rate by 25 basis points to three per cent at its final board meeting of the year, bringing to 175 basis points the total reduction in the rate since November last year.

RBA governor Glenn Stevens said most economic indicators suggested growth had been running close to trend over the past year and there were signs lower rates were starting to have some impact.

However, the exchange rate remained higher than might have been expected given the decline in export prices and the weaker global outlook and demand was still subdued.

"The board judged at today's meeting that a further easing in the stance of monetary policy was appropriate now," Mr Stevens said in his post-meeting statement.

"This will help to foster sustainable growth in demand."

While the cash rate is at its lowest level since the depths of the 2008-2009 global financial crisis (GFC), financial markets see another drop to 2.75 per cent when the central bank board next meets in February.

"Today's rate cut from the Reserve Bank is the early Christmas present that hard-working Aussies deserve," Mr Swan told reporters in Canberra.

But he also warned economic growth would likely decline in the next set of official data for the September quarter due to be released on Wednesday.

"I wouldn't be surprised if we saw, you know, a slight moderation in growth," Mr Swan said.

The economy is expected to have grown by 3.1 per cent in the year to September, a considerable slowdown from 3.7 per cent rate recorded in the 12 months to June.

Shadow treasurer Joe Hockey said rates were lower because of the challenges facing the economy, not because it was doing well.

"The fundamental point is the government has no plan to deal with the deterioration in the mining boom and the Reserve Bank is now having to do the heavy lifting," he told reporters in Sydney.

However, homeowners should be almost $47-a-month better off on repayments for an average $300,000 mortgage if the official cut is passed on in full by the major banks.

Mr Swan and Prime Minister Julia Gillard on Tuesday urged the banks to pass on the reduction in full.

The first bank to move, the mid-tier Bank of Queensland, cut its lending rate by 20 basis points rather than the full 25, which could be a portent of what the big banks will do.

The RBA decision came as new data suggested the residential building market may not yet be up to the challenge of filling the gap left by the mining investment boom as it comes off the boil next year.

Building approvals tumbled 7.6 per cent in October compared to the previous month.

"The setback in building approvals do not augur well for a housing recovery in early 2013," Master Builders Australia chief executive Wilhelm Harnisch said.

By Colin Brinsden, AAP Economics Correspondent