Interest rates are set to be cut for the second time in just four weeks to a new record low of one per cent, saving typical borrowers at least $70 a month.
Financial markets regarded another rate cut on Tuesday afternoon as a 77 per cent chance.
Should those predictions come true, it will represent the first time since 2012 that the Reserve Bank of Australia had cut rates in successive months.
Another quarter of a percentage point rate cut would take the cash rate to a new record low of just one per cent, the lowest since the central bank was established in 1959.
Home borrowers are set to be the big winners provided the banks pass on in full the 25 basis point cut, with only the Commonwealth Bank and NAB having done so in June.
ANZ only passed on an 18 basis point cut while Westpac trimmed its standard variable rate by 20 basis points, angering Treasurer Josh Frydenberg.
If the banks do cut rates by a full quarter of a percentage point, a borrower with a typical $500,000 mortgage would save at least $70 a month in mortgage repayments.
A Commonwealth Bank customer on an introductory standard variable loan would see their mortgage rate fall to 3.34 per cent as their monthly repayments fell to $2,201.
A CBA borrower paying off principal and interest would see their monthly repayment fall by $76 to $2,645 as their mortgage rate fell to 4.87 per cent.
Lower interest rates, however, are bad for retirees and people who live off fixed interest.
It is also bad news for people wanting to travel overseas as a rate cut usually weakens the Australian dollar.
The RBA board is meeting in Darwin on Tuesday, the day after CoreLogic data showed a monthly recovery in Sydney and Melbourne real estate values for the first time since 2017.
The Australian economy, however, is growing at the slowest pace since the global financial crisis a decade ago and the unemployment rate of 5.2 per cent is higher than ideal.
The Australian Securities Exchange 30-day interbank cash rate futures on Monday afternoon rated a rate cut as a 77 per cent chance.
KPMG chief economist Brendan Rynne said the need for a rate cut highlighted the fragility of the economy.
‘The RBA is sending a signal to the market, to politicians and to the community at large, that the Australian economy is not firing on all cylinders, and as one of the guardians of national welfare, the RBA is looking to help out where it can,’ he said.
Dr Rynne said once the cash rate hit one per cent, rate cuts became less effectual.
‘Either way, one per cent is likely to be close to the lowest rate before more aggressive, non-conventional forms of policy intervention would need to be considered,’ he said.
Were interest rates to reach zero, Australia would be in a situation known as quantitative easing where the central bank effectively printed money by buying up government bonds in a bid to boost the supply of money.
The United States, the European Union and Japan have done so in recent years.