Rates to fall to 5% by Christmas

Financial markets expect the Reserve Bank to cut rates to 5% before the end of 2008. In the last five weeks the RBA, has cut rates from 7.25% to 6%.

The RBA is thought to be concerned about weakening household expenditure and may be hoping to offset slower business activity by stimulating retail demand. Jobs growth slowed last month and unemployment was up. Business and consumer confidence is coming down while demand for commodities is weakening. Economists are predicting that Australia will escape the economic recession now affecting many other countries.