The Reserve Bank of Australia (RBA) is set to meet on Tuesday against a backdrop of improving economic conditions at home but increased uncertainty abroad as Greece drama continues to unfold and concerns of a credit bubble in China linger.
Taking into account the myriad of factors, economists expect the central bank is likely to stand pat this month after having reduced interest rates twice this year, in February and May.
"The combination of having already delivered 50 basis points of cuts in H1 and the more positive domestic numbers are expected to keep the RBA firmly on hold next week," said Paul Bloxham, chief economist for Australia and New Zealand at HSBC.
"We expect the RBA to be in 'wait and watch' mode, as it seeks more information about the full impact of the cuts it has already delivered this year," he said.
The past month has brought stronger economic data on several fronts, including employment, housing and business sentiment. Business confidence, for example, surged to a nine-month high in May, receiving a boost from lower borrowing costs and a federal budget that offered tax incentives for small business, the National Australia Bank's monthly survey of over 400 firms showed.