A 25 basis point reduction in interest rate will make sense as "insurance" to improve the Australian economy, wrote Shane Oliver, head of Investment Strategy and chief economist at AMP Capital, in a note.
"Growth is too low, confidence is subdued, prices for key commodities like iron ore and energy have collapsed resulting in a much bigger hit to national income than expected. Besides, the Australian dollar remains too high and is set to bounce if the RBA fails to cut soon," he added.