The Reserve Bank of Australia is likely to cut the official cash rate next month to further stimulate the country's economy, according to a forecast by Westpac economists.

"Over the last few weeks, markets had lost confidence in the October view. On September 13 markets priced an October move with a probability of 26%. We were feeling decidedly lonely with our October call. However, over the course of last week markets have moved to an 80% probability of this move," Westpac chief economist Bill Evans said.

Evans explained that the central bank will be basing its decisions on three factors: the labour market, the housing market, and the GDP growth.

He said while the strong employment growth was recognised, joblessness had remained steady, and wages had remained low. Australia's unemployment rate grew to 5.3% in August, above the market expectation of 5.2% and the RBA's target of 4.5%.

Also read: What Will Likely Compel The RBA To Cut Rates Further?

"We are aware that the governor sees rising wages growth as the key to a sustained lift in spending growth and higher inflation," he said.

With regards to housing, Evans said there remains weakness despite a turnaround in established housing markets.

"But from the perspective of economic activity there was further weakness in dwelling investment in the near term and low turnover in the housing market meant that spending on home furnishings and other housing-related items was not expected to contribute to consumption growth in the near term," he said.

Westpac's October rate-cut forecast would see the cash rate go down to another historic-low of 0.75%. Another rate cut is expected in February 2020, which would bring the cash rate to 0.5%.

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