RBA likely to cut rates at the policy meeting next week

Australian business investment fell to a three-year low of 2.2 percent in the fourth quarter of 2014, according to the latest report published by the Australian Bureau of Statistics. The report also showed that the first estimate of expenditure for 2015-16 is $109,799m, 12.4% lower than Estimate 1 for 2014-15.

"The numbers look pretty bad. The estimate for 2015/16 was disappointing. It's around A$10 billion less than we were calling for. And it's soft across the board. Mining is set to fall further, and manufacturing was revised down again", said Stephen Walters, Chief Economist, JPmorgan.

The latest figures suggest that next week's national accounts will show annual economic growth rate lingering below three per cent while keeping the pressure on the jobless rate on the higher side.

"What is lacking in the economy is investment and these figures are still fairly bleak. Mining is still declining at a rapid rate, non-mining investments are also declining at a rapid rate and there is a bit of light at the end of the tunnel for the rest of the economy, apart from manufacturing, but it's still not enough to offset the mining decline", said Shane Oliver, Chief Economist, AMP Capital Investors.

The Reserve Bank of Australia (RBA) slashed rates to record low of 2.25 percent earlier this month in order to stimulate the economy. Analysts believe that the central bank will further cut rates soon but are divided over the timing of the move. Some expect the next cut to come as soon as the March 3 policy meeting.

"This is a disappointing set of numbers for those looking for a successful growth transition," said Michael Blythe, chief economist at Commonwealth Bank."This adds to the case for the Reserve Bank to step up to the plate again next week and so I think we'll see a 2 percent cash rate next Tuesday."

AUD/USD dropped 0.5 percent to 0.7848 in Asian trading, weighed by disappointing Australian business investment data. It currently trades around 0.7885 levels, having posted day's high at 0.7893. On the downside, support is located at 0.7740 and on the topside, resistance is seen at 0.7979.

"AUD/USD: 0.7837- 0.7889 overnight range. Weak private capex data overnight fails to do much damage as spot holds above 0.7850 even as RBA rate cut bets for next week rise to 52% immediately after the data (from 39% prior to it). Support 0.7740", said Societe Generale Cross Asset Research in a note.