Latest national accounts and labour market data confirm the slowing of the Australian economy. In response, the Reserve Bank cut the cash rate by 0.25% to a new low of 2.25% on 3 February. Financial markets widely expected the Bank would cut again on 3 March, but they were disappointed. However, the accompanying statement from the Governor suggested that further interest rate cuts are likely and the markets continue to expect this over coming months. The statement also indicated that higher unemployment and a still high Australian dollar are key factors behind the Bank’s thinking.