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Australia's economic growth pace in coming months will slow as demand weakens and credit conditions stay tight, a survey shows.
The Westpac-Melbourne Institute leading index, which indicates the likely speed of economic activity three to nine months into the future, slowed to an annualised pace in 2.5 per cent in August, its weakest level in six years.
The reading has been below the long-term trend of four per cent for three successive months.
Westpac chief economist Bill Evans said weaker demand and tighter credit conditions were weighing down the economy.
"The concern with the current situation is the unprecedented interaction between weak demand and constrained supply of credit," Mr Evans said.
"Initiatives from governments to rebuild the capital bases of their banks will alleviate some concerns about the availability of credit but will do little to stimulate demand."
Evans said the Reserve Bank of Australia (RBA) was likely to cut interest rates by 50 basis points in November, and by another half a percentage point in December.
"Further demand stimulus will be provided as the Reserve Bank acts to bring interest rates down by a further 150 basis points over the next three to six months," he said.
The RBA delivered a 100 basis point rate cut this month for the first time in 16 years, taking the cash rate to six per cent.
A fall in the All Ordinaries Index, dwelling approvals and overtime worked were the biggest contributors to a decline in the annualised leading index during August.
