The Reserve Bank of Australia (RBA) is under pressure from unions and business groups to reduce the overnight cash rate when the policy board meets in May. RBA had keep interest rates at 4.25 per cent the past three meetings, but the big four instead increased their mortgage rates twice.

The Australian Chamber of Commerce and Industry (ACCI), which previously was critical of RBA's being too timid on interest rates, asked for 50 basis points rate cut to stop the decline in business competitiveness and boost consumer confidence.

"We have the capacity with our interest rates relatively high, to reduce those rates to stimulate business activity," ACCI Chief Executive Peter Anderson was quoted by Perth now.

"We should not be waiting for the world economy to fall around us before we act with the levers we have to strengthen our economy," he added,

Mr Anderson also warned of more job losses if the RBA would continue to delay a rate reduction. He said lenders must fully pass future rate cuts by the Australian central bank to borrowers.

Westpac senior economist Matthew Hassan agreed that to address the weak consumer sentiment, the RBA should approve at least one interest cut to bring back growth. He stressed that interest rate cuts provide support to the economy's medium-term growth outlook, but added 50 basis points cut would only "spook financial markets."

Futures market trading forecast the RBA would likely cut the overnight cash rate by 25 basis points.

Australian Workers' Union National Secretary Paul Howes accused the RBA of consistently making wrong decisions by keeping rates unchanged for the past three months.

However, former RBA board member Warwick McKibbin countered that the Australian economy was overall doing well, but acknowledged that the strong Australian currency and mining investment boom are hurting some sector.

"If the union movement was serious about saving manufacturing then they would pull back from some of the industrial action, they would lower the real costs of labour in some of these sectors and they would work with industry to try and solve the problem," ABC quoted Mr McKibbin.

The banking community is waiting for the Friday announcement of ANZ Bank on interest rate, which would likely set the tone for the other big 3 to follow ANZ's direction rather than RBA's policy.

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