Economists are predicting a cut of up to 1 percentage point on Tuesday, a move that would take the official cash rate to a record low of 3.25 per cent.
And some expect interest rates to fall to 2.5 per cent by midyear.
Already, Australian businesses are feeling the effects of the global financial crisis and the worldwide economic slowdown.
According to research by Dun & Bradstreet, the time that businesses take to pay their bills has blown out to 56.5 days, the longest since 2001.
Most companies expect accounts to be paid within 30 days. But, during the December quarter, Australian businesses were the fifth-slowest payers in the Asia-Pacific region, behind India, Malaysia, Indonesia and Sri Lanka.
D&B chief executive Christine Christian said rising trade payment days helped to predict whether companies were going to experience financial distress.
"It's bad because it's a sign that businesses have really hit a cash-flow wall," she said. "It's taking them nearly twice the official terms period to settle their accounts."
Ms Christian said that in the past businesses could use credit to manage any cash-flow issues. But now, without easy access to credit, they were delaying payment — a trend that created problems for other businesses.
However, listed companies gained on the sharemarket yesterday, with the S&P/ASX 200 Index heading 51.5 points, or 1.5 per cent, higher to 3495.5.
And the Australian dollar rose from near US66¢ to just under US67¢.
Meanwhile, inflation fell 0.3 per cent in the three months from October to December, according to the consumer price index data released by the Bureau of Statistics.
Headline inflation has plunged from 5 per cent a year to 3.7 per cent, despite increases in food, alcohol, tobacco and housing prices. And core inflation, which excludes more volatile items, also fell.
St George treasury economist Amanda Tan said headline and core inflation had fallen further than the Reserve Bank expected in November. The RBA forecasts were 4.25 per cent and 4.5 per cent respectively.
"The central bank should take comfort from the fact that inflation is clearly on a downward track towards its 2 per cent to 3 per cent target band," Ms Tan said.
Noting the moderation in inflation, the chief executive of the Australian Chamber of Commerce and Industry, Peter Anderson, called for the RBA to cut rates by a full percentage point next week.
Small businesses in particular had still not received the full benefits of earlier rate cuts, he said.
Predictions vary, but economists expect the RBA to cut the key overnight cash rate by between half a percentage point and one point, and some believe the RBA could cut by as much as 1.5 points.
Deutsche Bank economist Phil O'Donaghoe said he expected a cut of half a point, because of the aggressive way that the RBA had cut rates before Christmas.
At some point, the RBA would try to regain control of people's expectations, he said.
But Mr O'Donaghoe said the Government's spending decisions would have the greatest influence over Australia's economic outlook.
"That's going to matter," he said.
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