 Economists predict interest rates as low as 3% by July.
The Reserve Bank of Australia (RBA) is expected to cut official interest rates again when they meet next month for the first time since December 2008.
A reduction of between 25 and 50 basis points is tipped to occur when the bank meets on February 3. A reduction of 50 basis points would bring the cash rate down to 3.75% and is expected to be followed by further cuts in the coming months. Some economists are predicting the rate will fall as low as 3% by July.
Home owners and consumers were rejoicing during the last quarter when rates fell from a 12-year high to the lowest level in 35 years. Home loan interest rates fell from more than 9.5% to under 7% in just three months.
4Cast head of research Ray Attrill says that slowing economy and low consumer confidence was affecting retailers, the housing industry and job security, prompting the RBA to consider more rate cuts this year.
"We are faced with the prospect of flat-to-negative growth," Mr Attrill says.
"The risk is that inflation is going to be collapsing and will be below target sooner than the RBA is currently willing to admit.
"That is a recipe for rates having a lot further to fall."
Although we may not see any drastic cuts such as the 1 per cent cuts seen in October and December, the RBA is likely to cuts rates in February , and keep cutting until consumers start spending and exports pick up pace again.
Since September last year, the cash rate had been slashed from 7.25 per cent to 4.25 per cent - the lowest since May 1973, according to RBA figures. Banks and other lenders have passed on most of the cuts but not all. The recent cuts accumulated to offer home owners with an average $250,000 standard variable mortgage savings of around $450 per month.
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