The latest Westpac-Melbourne Institute Leading Index released yesterday has underscored the need for several rate cuts over the coming months.
The index, which indicates the likely pace of economic activity three to nine months into the future, dipped well below the long term trend of 3.9 per cent in June to just 2 per cent.
This was the slowest growth rate recorded since July 2001 and the sharpest fall since 2000.
Bill Evans, Westpac chief economist, said a significant easing in rates was now required.
“We expect the [Reserve] Bank to cut rates by 100 basis points by early 2009,” Mr Evans said.
Markets are confidently pricing in an initial rate cut of 25 basis points this September.