JP Morgan's Sally Auld expects the official cash rate will be slashed from its current setting of 1.75 per cent.
"We think that the RBA will take the cash rate to one per cent. It probably won't happen until 2017, but I think the key story here is that we need lower rates and a lower currency so the RBA can have as much help as possible in achieving trend like growth outcomes," she said.
Sally Auld says weaker consumer prices have the potential to crimp growth.
"People postpone consumption decisions, businesses postpone hiring decisions because they can probably hire someone for less tomorrow than they can today, businesses postpone capital expenditure decisions because they know they can buy their capital goods for cheaper tomorrow than today. You end up with what is potentially a nasty recessionary environment even though prices might be falling."
She adds, prices are falling because Australian products are generally seen as too expensive in a globalised environment.
"So what we're seeing is what economists call a margin compression, so that spread between what something costs a retailer and what they sell for, is actually starting to come down and i think part of the issue there is that for a long time one of the stories around Australia was that we had been quite uncompetitive so you'll often see people who come here from overseas and say, wow, it's quite expensive here whether its food, clothing or general retail and i think in the globalised world that we live in it is much harder for Australian retailers to sustain those sorts of margins."
Chris Weston, analyst at IG Markets says low inflation is an issue global central banks have been grappling with.
"We seem to be catching up with the rest of the world, that is the issue, I mean we've held of for so long within the RBA's target band for quite sometime, we're now finally outside that target band and that's been a huge wake up. I mean are we joining the rest of the world? The key point of differential is that places like Japan, the US and the ECB and Europe have been throwing the absolute kitchen sink they've not just cut rates substantially into negative territory but they've also gone for a rapid expansion of the monetary base."
They've done that by pumping money into their economies.
Sally Auld says, it's not as dire in Australia.
"When we turn it back to the Australian experience, it is a big part of why the RBA cut in May because they were sending a very strong message to the economy, to businesses, to consumers, that we're not that worried about the growth story, we're not that worried about the labour market, but we are worried about inflation, but guess what we're going to do something to shore it up."
It's leading more experts to rethink their rates strategy.
The Commonwealth Bank rejigged its forecasts on Friday.
"We now expect not only one interest rate cut this year, but potentially two over the course of 2016, so we're penciling a cut in August and we could see another one in November this year," says CommSec Market Analyst Steven Daghlian.
Cutting rates gives consumers more money to spend, shoring up the economy, but JP Morgan's Sally Auld warns, lower Australian interest rates mean a lower Australian dollar.
"So we're targetting 65 US cents on the Aussie by the middle of next year and I think that's a big part of the story. It's becoming sort of clear that if we leave the cash rate at around 2 and we let the Aussie wash around in the 70s somewhere, that is not going to give us loose enough financial conditions to sort of hit this inflation story."
