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Interest rates to be at 1 per cent by Melbourne Cup Day: Westpac economist Bill Evans

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Westpac's Bill Evans is the first chief economist of a big four bank to call for the Reserve Bank to cut interest rates this cycle.

Westpac's Global Head of Economics Bill Evans says an economic slowdown, prompted by a weakening housing market, which will see consumers save more and spend less, will force the Reserve Bank Board's hand.

"The housing story has what we think will be a wealth effect," he told SBS News.

"As the consumer feels less wealthy and so they'll be concerned about their finances."

Speaking after releasing his latest economic note, Bill Evans said he has lowered his economic growth forecast for Australia in 2019 and 2020, from 2.6 per cent, to 2.2 per cent.

"With growth at 2.2 per cent, and trend growth in the economy at 2.75 per cent, that will eventually weigh on jobs growth, and we'll see a gradual upward trend in the unemployment rate."

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Mr Evans is predicting unemployment will reach 5.5 per cent by late 2019, in contrast to Thursday's official labour market report, which showed a better than expected jobless rate of five per cent in January.

The report, from the Australian Bureau of Statistics sent the Australian dollar to a two-week high against the US currency, but moments later, the dollar lost all those gains and more, just as Mr Evans released his economic note.

"I think the message to the RBA right now is, your original assumption that the adjustment in the housing market was something that was necessary, but would have little impact across the economy is no longer the case and once you start to recognise that, you will be looking at lower consumer spending and that will need policy response," said Mr Evans.

Bill Evans says the RBA will likely cut the official cash rate by 25 basis points in August, and follow that up on Melbourne Cup Day in November, to bring it to one per cent.

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