Falling $A makes RBA rate cut unlikely The Reserve Bank of Australia is unlikely to cut interest rates on Tuesday as the falling Australian dollar does the central bank's heavy lifting. All but one of the 13 economists surveyed by AAP are forecasting the cash rate to remain at its record low of 2.75 per cent when the RBA meets next week. When the RBA last cut the cash rate - in May, when the Australian dollar was still above parity with the greenback - its board said low inflation had allowed it to make the reduction. It cited the high Australian dollar as one of the reasons why conditions remained tough for business. "Measures of business conditions had remained below average and business investment outside the resources sector was expected to remain subdued in the near term," the May board minutes said. Conditions in the business sector, as assessed in surveys, generally had remained below average, possibly in part because the exchange rate had remained high despite lower export prices and interest rates. But the Australian dollar has since lost more than 10 US cents and has hovered between 91 and 93 US cents since last week when US Federal Reserve chairman Ben Bernanke signalled a possible wind-back of the US central bank's economic stimulus. HSBC Australia and New Zealand chief economist Paul Bloxham said the RBA would likely leave the cash rate on hold next week, given the large movement in the Australian dollar and uncertainty about where the currency would settle. He said Australia's weaker-than-expected gross domestic product figures for the first-quarter "showed that the rebalancing of growth from mining to other sectors has been a bit slower than expected." "The lower Australian dollar is doing much of the RBA's work," Mr Bloxham said. From the RBA's perspective, the Australian dollar's fall will be the key development affecting its policy view. CommSec economist Savanth Sebastian said the RBA would likely wait until June quarter inflation figures were released, on July 24, with a rate cut likely in August. He said the pull-back in mining investment was occurring faster than expected and non-mining sectors needed to be inspired to invest and fill the spare capacity in the economy. "The Aussie, where it is, is still significantly higher than historical averages," Mr Sebastian said. Yes, in relative terms, it has fallen and that's a positive and a benefit and a stimulatory factor for the economy but I think, certainly, the reserve bank would want to see further improvement in terms of stimulatory measures and I think another rate cut in August may just do that for them. AMP Capital senior economist Bob Cunneen also expects a cut in August, unless the local currency continues to fall sharply. "The RBA should be cutting interest rates in coming months given the sedate economic activity in the non-mining sectors, subdued business and consumer confidence, as well as a sluggish labour market," he said.