Interest rate cut a hot tip on Melbourne Cup day

IF economists are right, the safest bet you can make on Cup Day is that the Reserve Bank will cut interest rates when it meets.

Rate cut the hot tip on Cup day

IF economists are right, the safest bet you can make on Cup Day is that the Reserve Bank will cut interest rates when it meets.

The Sunday Herald Sun surveyed 10 economists and finance houses and all expected an interest rate cut on Tuesday.

The only question dividing the experts was how much rates would fall -- with a clear majority predicting half a per cent cut, but a few guessing they would come down even more.

A cut of 0.5 per cent would lower payments on a 25-year mortgage of $250,000 by about $85 a month.

It would also boost the struggling Victorian housing market, which yesterday saw more than a third of listed properties fail to sell.

AXA Australia's chief investment officer Mark Dutton spoke for most experts when he said the slowing economy would push the Reserve into cutting between 0.5 and 0.75 per cent.

The ANZ, CommSec, AMP and Austock's Michael Heffernan predicted a 0.5 per cent cut, as did Access Economics' Chris Richardson.

Mr Richardson said the danger of inflation had diminished in recent months.

Peter Switzer, of Switzer Financial Services, believed the Reserve would follow Tuesday's cut of 0.5 per cent with another of the same size in December.

"They need to maintain the momentum," he said.

Laurence Blake, of E.L & C Baillieu Stockbroking, said the decline in home loan lending would have a big influence on the RBA's thinking.

"For this reason they will cut by at least 0.25 per cent on Tuesday," he said.

Bank analyst Robert Camilleri of Aviva Investments was more optimistic, saying he believed the bank would cut rates by 1 per cent.

AMP Capital economist Shane Oliver said the state of the sharemarket would influence the Reserve.

The only pessimistic note on a Tuesday rate cut was struck by Professor Paul Kerin, of the Melbourne Business School, who was not convinced there will be a rate cut.

"I think they will be conservative by the standards of what people are predicting," he said.