But doubts are growing that the banks will pass cuts in full to borrowers, despite the Government's urging and their own interest costs falling.

The Reserve will clarify its plans today when it releases its quarterly statement on monetary policy: a detailed stocktake of the economy and the financial sector, with new forecasts.

It is expected to flag a sharp policy reversal, with Reserve governor Glenn Stevens setting aside his fear of high inflation to argue the need to focus on reviving the economy.

A Reuters survey of 20 financial institutions found virtually all expect the Reserve to make from three to six rate cuts over the next year.

Most expect the cuts to start next month. Six of the 20 believe the Reserve will enter its U-turn with a double cut, slicing half a percentage point off its overnight cash rate.

Ten believe the Reserve will move by its usual 0.25 of a percentage point.

"The RBA has been disturbed by the rapidity of the economic slowdown, which has been complicated by the credit crisis," said Westpac chief economist Bill Evans.

"We estimate that domestic demand slowed to an annualised pace of 1.6pc in the June quarter, down from almost 6pc in December.

"We now expect that the bank will cut rates by 0.5pc following its September 2 board meeting."

But while acting Prime Minister Julia Gillard called on the banks to pass on any rate cut to borrowers, mortgage broker AFG warned that they wouldn't — and urged the Government to act to boost competition.

"A year ago, less than 50pc of home loans went to the big banks," AFG executive director Malcolm Watkins said.

"Now it's over 70pc, and there's virtually only four lenders out there.

"If there's a rate cut, they are more than likely to keep half of it."

Mr Watkins said that instead of lending just to banks, the Reserve and the Future Fund should lend to their competitors, to shore up competition in the lending market.