August rate cut now off agenda: Westpac

WESTPAC'S chief economist has pushed back his expectation for a further cut in the official cash rate.

THE chief economist of one the nation's major banks has pushed back his expectation for a further cut in the official cash rate beyond August after a report from the central bank indicated no urgency to move again.

The Reserve Bank of Australia (RBA) has released the minutes of its July 3 board meeting, when it left the cash rate at 3.5 per cent after making cuts in the previous two months.

Board members thought the current rate was "appropriate'' with the economy having a little more momentum than was envisaged earlier.

The minutes said reductions in the past six months were a "material easing'' in policy. Notably, they made no reference to next week's June-quarter inflation data, suggesting it is not key to the immediate rate outlook.

Westpac chief economist Bill Evans still expects the cash rate will eventually be cut by another 75 basis points to a record low of 2.75 per cent.

"However, due to the board's current policy disposition it is necessary to push out the timing of the first cut from August until the fourth quarter of 2012,'' Mr Evans said.

He now expects two 25 basis point cuts, in October or November and December, and a final one in either February or March next year.

In line with the International Monetary Fund's (IMF) latest assessment of the global economy released in Washington on Monday, the RBA board believes there is a significant risk that the situation in Europe may deteriorate again and spill over to other economies.

In its latest World Economic Outlook Update, the IMF slashed the growth outlook for two of Australia's key trading partners, China and India, and warned that downside risks continued to loom large for the world economy.

While it did not give a specific forecast for Australia, it cut China's growth forecast to 8.0 per cent from 8.2 per cent for 2012 and to 8.5 per cent from 8.8 per cent for 2013.

It chopped India's outlook to 6.1 per cent and 6.5 per cent for this year and next, from 6.8 per cent and 7.2 per cent respectively.