'Consumers to use rate cuts to pay off debt'

Australian consumers are most likely to use the recent Reserve Bank of Australia (RBA) rate cut to bolster their debt repayment plans, rather than investing the extra cash in savings accounts.

Speaking to ABC Inside Business, Gail Kelly, chief executive officer of Westpac, said that consumers are likely to adopt a wait-and-see attitude before increasing their spending and saving.

Mrs Kelly added that another rate reduction was likely – particularly as the impact of the European debt crisis begins to be felt around the globe.

She said that the Australian government has a very low level of debt at the moment so it has plenty of "ammunition" to provide "further stimulus" to the economy if it is required.

Recently, Stephen Roberts, Nomura chief economist, told the Australian Associated Press that further rate cuts were likely to have a positive impact on the mortgage market – which has already been experiencing an upturn.

Mr Roberts noted the market was going to pick up in the next few months.

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