The weak performance from the manufacturing sector, falling job advertisements and slight inflation may just what the Reserve Bank of Australia (RBA) needs to cut interest rates even lower.

Economists observe that RBA may not lower interest rates anytime soon because of the low exchange rate of the Australian dollar against the US dollar. The current interest rate is set at 2.75 per cent.

Inflation is up by 0.2 per cent for the month of May. The rise in inflation rate is affected by the retail prices of vegetables, fruits, books and rent. The low prices of fuel and travel accommodations offset the inflation rate. The data is based on the survey released by TD Securities.

Job advertisements were also found to be not doing well for the third consecutive month according to the ANZ survey. Compared to their peak by the end of 2010, job advertisements are at their lowest drop at 28 per cent.

Gross operating profits for the first quarter of the year increased by 3 per cent. Economists have forecasted an increase of 1.5 per cent.

Business inventories dropped to 0.6 per cent during the first quarter of the month. These are the amount of stocks companies hold in warehouses or those not sold to customers. Economic forecast suggested a different outcome. Economists expected business inventories to remain unchanged but the data shows otherwise. Real estate prices further weakened based on data from RP Data-Rismark.

National capital city home prices dropped to 1.2 per cent compared to a 0.5 per cent in April. Based on RP Data-Rismark data, house prices were still up 1 per cent at the beginning of the year.

It is worth noting that the inflation rate target of Reserve Bank of Australia is between 2 to 3 per cent. The current data shows a rise in 2.2 per cent which is actually near the bottom line target of RBA.

Manufacturing sector weakening

Australia's manufacturing industry has continuously suffered from the rising dollar, high costs of labor and rising energy prices. RBA's interest rate cuts last year had little impact to the manufacturing sector according to AiG analysts.

The RBA is on a "wait and see" game to decide whether or not interest rates need to be cut again. Economists say this is more than likely if unemployment continues to rise in the country.