Another helping of rate cuts looms on menu

THE Reserve Bank today is expected to deliver back-toback cuts to the cash rate, economists say, after a fresh round of weak figures strengthened the case for an immediate move.

The wait-and-see approach adopted by economists following February’s icebreaking 0.25 per cent rate cut is swiftly being replaced by calls for a second helping, as signs emerge that the economy continues to grind its gears.

Activity in Australia’s longsuffering manufacturing sector took another step backwards this month, while a closelywatched inflation gauge revealed inflation was flat in February, further opening the door for the RBA.

Manufacturing activity slid 3.6 points in February to 45.4 – its third straight month of decline and well below the 50- point level that separates expansion from contraction – according to the Australian Industry Group yesterday.

The result meant it was important that the Federal Government use May’s Budget to introduce activity-boosting measures, Ai Group chief Innes Willox said, including “delivering on the commitment to cut the company tax rate to 28.5 per cent for all companies”.

Separately, the TD Securities-Melbourne Institute monthly inflation gauge revealed headline inflation was unchanged from a month earlier, sitting at 1.3 per cent in the year to February.

That figure is well below the central bank’s 2-3 per cent target band, with TD’s head of Asia-Pacific Research, Annette Beacher, labelling today’s RBA meeting a “live decision”.

The dollar slipped below US78¢ again and was fetching US77.64¢ late yesterday.