A fresh batch of bleak news on the economy has firmed up predictions that the Reserve Bank will announce a third successive interest rate cut minutes before the running of today's Melbourne Cup.
On the eve of the rates decision, the main betting was on whether the cut would be half a percentage point or more.
A half percentage point cut, if fully passed on by banks, would bring standard variable mortgage rates down to about 8pc.
A combination of the traditionally slow pre-Melbourne Cup weekend and caution over this week's interest rate decision saw the nation' s auctioneers struggling once again.
A bigger cut would take rates to their lowest level in two years, saving typical home buyers hundreds of dollars a month compared with the situation, earlier this year.
As Reserve Bank staff prepared for today's meeting and the 2.30pm announcement, they were presented with new figures showing job vacancies dwindling, retail spending sliding and inflation evaporating.
Amid the deteriorating outlook, however, Treasurer Wayne Swan said he did not expect the slowdown to turn into a recession.
"The Government will publish in the next week or so our mid-year economic and fiscal outlook and all of those figures will be out there for everybody to see," Mr Swan said.
"But I would just make this point: the Government does expect to see positive growth."
The comments came after figures were released showing retail sales fell a seasonally adjusted 1.1pc in September, led down by spending on non-essential goods.
Large retailers did better than did small retailers.
Macquarie Bank's Rory Robertson warned that the "paradox of thrift" seemed to have taken over, with households and businesses suddenly "saving for a rainy day" - thus making the arrival of those bleaker times much more likely.
The ANZ count of job advertisements in October fell 5.9pc, with Victorian newspaper job ads down 11pc in the month and 31pc over the year.
"Growth in newspaper job advertisements is at its weakest since 2001," said ANZ economist Warren Hogan.
"The economy avoided recession then, but the unemployment rate climbed to 7pc.
"The only weaker outcomes for newspaper job advertisements were in the recessions of 1991 and 1982."
In another sign of a weakening economy, the Reserve Bank's commodity price index slid 5.1pc in October, its first fall after a year of spectacular gains.
And the inflation gauge prepared by the Melbourne Institute and TD Securities fell to an annual rate of 3.9pc in October from an official rate of 5pc in September.
"It shows starkly the speed at which inflation is unwinding," said TD strategist Joshua Williamson.
"A further cut in interest rates is entirely appropriate."
Financial markets are pricing in a 100pc chance of a rate cut of half a percentage point today and an 81pc chance of a larger cut, with most of the data before the board backing the case to go bigger.
The alternative case for a smaller cut is supported partly by a belief among Reserve Bank staff that the retail trade figures are unreliable following cutbacks at the Bureau of Statistics.
The $1000 bonus payments to be delivered to families, pensioners and carers in December will also boost consumer spending in the lead-up to Christmas.
In the last budget, the economy was forecast to grow at 2.75pc this financial year and by 3pc in 2009-10.
The International Monetary Fund predicted recently, Australia would grow by 2.5pc in calendar 2008 and 2.2pc in 2009.
The May budget projected a surplus this financial year of $21.7 billion and $19.7 billion for 2009-10.
But the Government will spend nearly half this year's surplus on its recently announced stimulatory package.
And Prime Minister Kevin Rudd has indicated more will be done if needed.
The surplus is also under pressure from contracting revenue.
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