SYDNEY - Australia's central bank slashed its official interest rate by a larger-than-expected 75 basis points Tuesday, bringing it down to 5.25 percent amid concerns about a slowdown in China.

The Reserve Bank of Australia (RBA) said a significant reduction in the cash rate was warranted given current global and domestic conditions.

"The Board will continue to monitor developments and make adjustments as needed to promote sustainable growth consistent with achieving the 2-3 percent inflation target over time," RBA governor Glenn Stevens said in a statement.

Market forecasts had been for a 50 basis point cut in the wake of a sharp and unexpected one percent cut in October designed to counter the effects of the global financial crisis.

In a statement released after the RBA board's monthly meeting on monetary policy, Stevens said world financial markets remained turbulent and share markets volatile while the Australia dollar had also tumbled.

Stevens also pointed to worries about a slowdown in China and the flow-on effect this could have for commodity prices and therefore the Australian economy.

"International economic data have continued to point to significant weakness in the major industrial economies, and there have been further signs that China and other parts of the developing world are slowing as well," he said.

"These conditions have contributed to further falls in world commodity prices."

He said the combination of conditions meant it appeared likely that spending and activity in Australia will be weaker than earlier expected.