More rate cuts to come, economists say

The Reserve Bank of Australia (RBA) is worried about a slowdown in the world economy, which means more rate cuts are coming, economists say.

The central bank slashed interest rates by 75 basis points this month, taking the cash rate to a three and a half year low of 5.25 per cent.

The minutes of that November 4 board meeting have revealed policymakers were concerned about how global financial problems would affect the Australian economy.

"Key factors in members' consideration of the policy decision were the continuing poor conditions in financial markets, the significant deterioration in the outlook for the world economy, with implications for Australia, and the likelihood that inflation in Australia would fall over the year ahead," the minutes said.

Commonwealth Bank of Australia senior economist John Peters said the RBA was particularly worried about how a slowing US economy would hurt Australia.

"They're concerned about the growth outlook and they're really trying to ensure the economy doesn't follow the Anglo economies into recession," he said.

Mr Peters said the RBA was likely to cut rates by 50 basis points in December, and keep cutting the cash rate until it fell to four per cent.

"They'll continue their policy of chunky (rate cuts)," he said, adding the RBA wanted monetary policy that was looser than neutral.

The RBA contemplated a smaller rate cut of 50 basis points but the risks of weakening demand prompted the board to lower its target for the cash rate by 75 basis points, the minutes said.