Growing fears of a new global recession and a bloodbath on the Australian share market yesterday have tipped the balance in favour of a rate cut of at least 0.25 percent when the Reserve Bank of Australia board meets today.
Just a week ago economists were divided on whether the RBA would deliver its second consecutive rate cut after lowering the official cash rate by 50 basis points to 3.75 percent in May.
An AAP survey of 16 economists released today found 12 expected a cut of 0.25 percentage points, with one predicting the RBA may announce a 0.50 percent cut.
Watch ninemsn's live stream of the interest rate decision at 2.30pm AEST
A similar survey conducted by Dow Jones Newswires found six out of 20 economists were tipping a rate cut of 50 basis points.
Around $24 billion was wiped off the Australian share market yesterday as panic selling gripped the market amid fears of an impending global recession.
The market tumbled nearly two percent to its lowest level in seven months, with the ASX200 index plunging below 4000 points for the first time since November last year.
The share market rout followed dismal economic figures from Europe, China and the US which created a worrying outlook for the global economy.
"The world has changed, and changed very, very quickly," Nine News economics editor Ross Greenwood said.
Mr Greenwood said the gathering gloom is expected to be a key factor in any rate cut decision delivered today with factors like the debt crisis in Greece and a possible dismemberment of the eurozone top of mind.
AMP chief economist Shane Oliver predicts a cut of 0.5 percentage points, arguing the RBA needs to take action to help stimulate the local economy in the face of weak manufacturing activity in China and Australia.
The RBA will announce its decision at 2.30pm AEST.
The Australian share market looks set to open higher today after mixed news from Wall Street overnight.