Economists predict Reserve Bank will cut interest rate to 2 per cent, survey finds
Most economists believe the Reserve Bank will cut the cash rate again today, but that it is likely to be a tough call.
Last month the Reserve Bank cut the key rate to a historic low of 2.25 per cent and another cut today would take it to 2 per cent.
Recent data shows cracks in the economy, particularly figures released last week showing very weak business investment intentions.
The figures show the long-awaited boost in non-mining business investment remains a long way away, with many economists scaling back their expectations for growth in the December quarter.
Weak employment, inflation and company profit figures add to the compelling argument for another rate cut.
Since February, ANZ senior economist Justin Fabo has forecast a cut and he says recent data only adds to his case.
"[It] suggests to us that the bank would see little value in waiting for further confirmation of the need for additional stimulus to the economy," Mr Fabo said.
Surprise interest rate cuts in China over the weekend have also been taken as a sign that Australia's biggest trading partner is slowing, causing trouble for our exports.
But 11 out of the 29 participants in a Bloomberg survey indicated they believed the RBA would keep interest rates on hold.
UBS chief economist Scott Haslem said recent economic activity, particularly the poor outlook of capital expenditures meant "there was little to support an 'on hold' RBA".
Some believe the board wants to wait for Wednesday's official growth figures before moving, however Citi senior economist Joshua Williamson believes there is enough evidence to warrant another cut.
Mr Williamson also said the RBA would get better "bang for its buck" if it moved this month, taking some of the market by surprise and therefore having a greater impact on the dollar.
The over-heated investor housing market is another thing that could keep the board on hold, but Mr Williamson said the RBA was dealing with that issue separately.
"The Reserve Bank has said that it is looking to APRA to actually do more work and actually deal with more irrational exuberance that develops in the housing market, and in that respect actually give themselves somewhat of a free pass to look at other areas of the economy," he said.
The RBA will publish its decision at 2:30pm (AEDT).
