It is the Australian equivalent of a Mexican standoff. Up and down Martin Place in central Sydney, the country’s big banks are eyeing each other following the Reserve Bank of Australia’s decision to cut its benchmark interest rate by 25 basis points. Should they pass on the cut to customers? On the one hand, their funding conditions are tough. On the other, they face political and public ire if they do not.

This is the lesson for Europe and the US from the RBA’s move: even with decent economic growth, Australian consumers remain very nervous. Instead of resuming their old spendthrift ways, they are saving. At 10 per cent of disposable income, Australia’s households almost match German levels and are more than double US or UK rates.

The main reason for the RBA’s cut – its second in successive meetings – was the weakening of the global economic outlook as a result of Europe’s crisis. Softer commodity prices allowed the bank the inflation wiggle-room to act. But the focus of its easing is the part of Australia’s economy not enjoying a China-led resources boom. House prices are slipping while the pace of retail sales has slowed. Average trend growth in sales is steady at 0.2 per cent a month, from 0.5 per cent in the first decade of this century. The RBA talked on Tuesday of “changed” household behaviour instead of merely “cautious” as it did a month ago. In other words, it thinks subdued, deleveraging consumers are the new norm.