NAB tips two more 2013 rate cuts

By a staff reporter

National Australia Bank Ltd has changed its rate cut call, flagging two more cuts to the official cash rate by the end of 2013.

The decision follows a speech from Reserve Bank of Australia (RBA) Governor Glenn Stevens on Tuesday which gave a "green light" for lower interest rates.

"Until yesterday the RBA had been expressing optimism about other drivers of growth picking up," NAB said in a statement.

"Yesterday Glenn Stevens provided a much more sober and realistic outlook, suggesting that the economy cannot rely on housing and consumption to plug the growth hole.

"This is in line with our forecasts and suggests that, having recognised the reality of lower growth with benign inflation, more rate cuts are likely."

NAB also referred to ongoing sources of weak domestic demand and a downturn in mining investment.

The bank had previously forecast a 25 basis points rate cut in August to 2.5 per cent.

It now expects a second rate cut of 25 basis points to 2.25 per cent, likely in November after third-quarter inflation figures, "although it could be earlier".

NAB said the RBA would "retain a bias to ease well into 2014", while "a cash rate below 2.25 per cent remains a real possibility".