THE last time the Reserve Bank dropped rates by 1 percentage point was in May 1992. The aim was to help the country emerge from a recession.

Yesterday's movement of 1 per centage point was to prevent it falling into one.

The size of the reduction caught everybody by surprise, but some more than others.

All the political posturing in recent days was based on the market-led assumption that the Reserve would drop rates by 0.50 percentage points, of which the banks would pass on only half.

Perhaps Kevin Rudd and Wayne Swan, who are in daily contact with the Reserve, began to glean otherwise.

For more than a week they adopted the politically unpopular stance of advocating the banks pass on only what they could afford, not the full amount. When the banks' own borrowing costs cooled, they could pass on the rest.

Malcolm Turnbull leapt in, saying Rudd and Swan had no business defending the profits of the banks. The banks were still very profitable and if they decided they could not afford to pass on the full amount, they should explain why.

Thus the battle lines were drawn around the expectation that home owners and business operators could expect, at best, a 0.25 percentage point reduction.

After yesterday's shock decision, Turnbull still insisted the banks pass on the full amount. However, his argument became awkward because the size of the cut had given everybody a win - a bigger than expected decrease for home owners and business while allowing the banks to keep a little for themselves.