Australia's central bank cut interest rates by a quarter point to 3.25pc on Tuesday, their lowest level since the global financial crisis, and warned the growth outlook for next year had weakened.
Glenn Stevens, Governor of The Reserve Bank of Australia, said global weakness was weighing on the outlook, with Europe (Chicago Options: ^REURUSD - news) contracting and the United States only seeing modest growth.
"The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside," he said in a statement.
"Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago."
Interest rates are now the lowest since October 2009, when the central bank first resumed rate rises them following the world downturn.
The Australian dollar fell around half a US cent on the cut, to $1.0320 from US$1.0369.
China is the major customer for Australia's natural resources, particularly coal and iron ore, and slowdown in its demand for the key steelmaking ingredients has weighed on prices.
Mr Stevens said commodities prices were "significantly lower than earlier in the year", squeezing export earnings.
Looking ahead for mining, he said the "peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected", with demand in other areas of the economy yet to strengthen as forecast.
Commonwealth Bank analyst Michael Blythe said Mr Stevens' remarks on the mining sector were significant, signalling a more hawkish view on how long the boom had left to run.
"Before now they were saying (the peak in investment) would be in the next few years," he said. "So we'll need the non-mining part of the economy to pick up."