Pressures mount for an interest rate cut FEDERAL Treasurer Wayne Swan could get the benefit of an interest rate cut to help ease the pain of any spending cuts in this month's federal budget. New data shows the Australian economy continues to see weakness in sectors the government is hoping will ramp up to fill the gap being left by a fading mining investment boom. This means a rate cut at the next Reserve Bank of Australia (RBA) board meeting on May 7 could be on the cards, just a week out from the budget. Mr Swan concedes Australia's transition to a stronger non-mining economy - particularly in housing construction - may not be seamless and could lead to "bumps" in the labour market. Australian Bureau of Statistics figures released on Thursday appeared to confirm this view, with approvals for new building construction in March slumping by 5.5 per cent - the biggest monthly drop in seven months. Master Builders Australia chief economist Peter Jones said the result tempered earlier expectations of an improvement and could worsen as the approaching September federal election stoked uncertainty. "The political uncertainty would only add to concerns, affecting investor sentiment and working to drag down approvals of units and apartments," he said in a statement. "This is likely to be exacerbated in coming months as the government looks for options to consolidate its budget position," he said. Prime Minister Julia Gillard says all budget savings options are on the table and is already seeking to raise the Medicare levy by half a percentage point to two per cent, to support a national disability care program. The building data follows a jump in the unemployment rate to 5.6 per cent, its highest level since late 2009 at the back end of the global financial crisis. "It does not provide us with the confidence that it will provide a sufficient offset to the growth gap the fall in mining investment will leave in the year ahead," Macquarie Research economist Gabby Hajj said in a client note. Deloitte Access Economics' latest Investment Monitor shows the total value of investment projects across the nation fell by $24.7 billion in the March quarter to $928.9 billion. "Mining investment will peak in the next 12 months, passing the baton to other elements of the investment landscape which are clearly not ready for it," Deloitte Access Economics partner David Rumbens said in the report. This weakness, combined with benign inflation, increases the chance of an interest rate cut next week. However, financial markets are pointing to a greater chance of a cut in June when more economic data is available.