Australia's economy appears to be slowing and some economists argue that a more subdued outlook could lead to further monetary easing from the country's central bank.
Australia is due to report first quarter economic growth on Wednesday. While economists polled by Reuters expect robust growth of 3.2 percent on-year, up from 2.8 percent in the previous quarter, and 0.9 percent on-quarter, a marginal increase on 0.8 percent last quarter, analysts say the economy will take a turn for the worse in the second quarter.
"I think the second quarter is where we'll see a huge disturbance as there's been a huge change or shift back in [Australia] that will certainly affect that number," said Evan Lucas, market strategist at IG.
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"All of a sudden come April things weren't as rosy coming out of China, people were talking about the budget which was perceived as being quite tough - and as taking 0.3 percent of GDP (gross domestic product) out of the economy according to most economists. All of that stuff is going to filter through," he said.
Lucas expects second quarter growth to slow to 0.4 percent on-quarter from 0.7-0.8 percent in the first quarter and sees this pull back prompting the Reserve Bank of Australia (RBA) to take a more dovish stance.
"The effects of the budget, the slowdown they've finally seen in housing prices, the real under-performance in commodity prices and the consequential effect on the mining space may finally see their neutral status going back to slightly dovish," he added.
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Other economists shared this view. Analysts at Goldman Sachs (NYSE:GS - News) also expect a more dovish tone from the RBA ahead of Tuesday's policy meeting due to a number of factors.
"Commodity prices have fallen sharply, global growth faltered somewhat in early 2014, inflation printed relatively benignly and business and consumer surveys moved lower. In response the RBA incrementally has sounded more dovish," Goldman analysts said in a note. They expect the RBA to cut interest rates by 25 basis points in September.
Australia's economy enjoyed 20 years of strong growth thanks to its mining boom, but lost some of its luster recently as the boom showed signs of peaking and growth in China - its largest trading partner - slowed.
Furthermore, Australia's conservative government delivered the country's harshest budget in 20 years last month; many economists are concerned about the toll it will take on the economy.