Australia's central bank has cut its benchmark interest rate to a record low 1.75 percent, citing lower-than-expected inflationary pressures.

The Reserve Bank of Australia's board decided Tuesday to cut the cash rate by a quarter percentage point from its previous low of 2 percent. The board last cut rates about one year ago.

Bank Governor Glenn Stevens said in a statement the country's terms-of-trade remained much lower than in recent years. He said that while commodity prices had firmed from recent lows, the improvement followed substantial declines in the last couple of years.

The bank's announcement came just hours before Australia's Treasurer Scott Morrison was due to release his first budget. Morrison has indicated the budget will contain tax cuts for small and medium-sized businesses, designed to increase economic growth.