The co-ordinated action by six of the world's major central banks to ensure commercial banks don't fall foul of the European debt crisis adds to the case for another interest rate cut here next week, a senior economist at a major Australian investment bank says.
The central banks of the US, Britain, Europe, Japan, Canada and Switzerland joined together on Wednesday to provide cheaper money for banks, a move that was welcomed by global financial markets that have been persistently dogged by the woes of Europe.
At the same time, China's central bank eased the reserve requirements of its banks, a decision coming just hours before Chinese manufacturing data showed activity contracted for the first time in 32 months.
Macquarie Research divisional director Brian Redican says it could be argued that these actions reduce the greatest risk to the Australian outlook from a slump in China and the potential fall-out from Europe, lessening the need for the Reserve Bank of Australia (RBA) to cut rates further.
"In contrast, one could equally argue that the fact these central banks felt it necessary to take such aggressive action actually highlights just how fragile global growth is at present and if China is worried about its growth slowing too far, then the RBA should be just as concerned," Mr Redican said in an analysis.
"We think it makes a December rate cut more likely."
New data on Thursday also leaned towards the RBA following up last month's reduction in the cash rate with a further cut to 4.25 per cent from 4.5 per cent when its board meets next Tuesday.
Building approvals tumbled by 10.7 per cent in October to 10,484 units, when economists had expected a rise of over three per cent.
"This outcome vindicates the November interest rate cut, justifies the case for a further cut next week, and highlights the folly of (the federal government) blindly focusing on a budget surplus objective for 2012/13," Housing Industry Association chief economist Harley Dale said.
Retail spending grew for a fourth straight month in October, rising 0.2 per cent to just under $21 billion, although this was half the pace expected by economists.
Australian National Retailers Association chief executive Margy Osmond said sales were moving in the right direction heading into Christmas, with the best four-month run since June 2010.
"These figures are good news for retailers, though we know the sector continues to run in the slow lane of the multi-speed economy," she said in a statement.
"Retailers will be looking to the RBA to pop another Christmas gift in the Santa sack for them and deliver a further cash rate cut next week."
Still in the fast lane, resources and energy export earnings soared four per cent to a record $48.8 billion in the September quarter, the Bureau of Resources and Energy Economics (BREE) said.
Professor Quentin Grafton, BREE executive director and chief economist, said this reflected higher earnings from iron ore, metallurgical and thermal coal, gold and LNG.
Iron ore and coal production also increased in the quarter.
"Record iron ore production in the September quarter was underpinned by expansions to capacity in the Pilbara region, while coal production in Queensland continued to recover following the heavy rainfall in early 2011," Prof Grafton said.
