 Is a second stimulus package the answer?
Home owners could soon be saving an extra $120 a month on their home loan. If the Reserve Bank of Australia (RBA) cuts rates by 75 basis points when they meet again in February, the official rate will fall to 3.5% and home loan rates may fall to nearly 6 per cent.
The predictions come as Wayne Swan indicates a second stimulus package may be on the way. With the economy still slowing, the treasurer is hopefull that a combination of rate cuts and a government spending spree will boost consumer and business confidence.
While unofficial figures put inflation at it lowest level in three years, new business borrowing fell by 10 per cent in December, signalling bad news for employment. Personal finance and commercial finance commitments dived a seasonally adjusted 1.8 per cent and 10.4 per cent.
"We'll look at all this evidence as it comes through and we will respond, if necessary, in a timely way." Mr Swan said.
Opposition Leader Malcolm Turnbull has backed any tax cuts saying history has proved it is the best economic stimulus.
The first economic stimulus package spent up to $10.4 billion. A second stimulus package from the government may not be as generous however it may include more payments to home buyers, pensioners, families and carers.
The official interest rate has been falling since September, amid the first signs of a slowing economy and a looming recession. Whether the rate will fall again is certain, but by how much is debatable. Some predict cuts of 50 basis points while other economists are seeing a larger cut of 75 basis points on the cards.
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