A half a percentage point official interest rate cut appears to be the surest bet on tomorrow’s Melbourne Cup day after a range of data shows the economic slowdown is biting.

The cut could be the only bright spot on the horizon for Australia’s economy, with Prime Minister Kevin Rudd today offering a dour outlook.

Calling the economic outlook “ugly”, Rudd was backed by new data showing business is rapidly winding back hiring intentions amid weak consumer spending.

Manufacturing is also suffering its worst performance in at least 16 years, and wealth destruction is not confined to shares and superannuation, with house prices on average falling for a second consecutive quarter.

“Growth in this economy and jobs are under direct threat from the global financial crisis,” Rudd told reporters in Brisbane.

“It will be tough, it will be difficult, it will be hard, it will be ugly, particularly when you look at the unfolding economic data from around the world and the beginning of a global economic recession.”

But soothing the Reserve Bank of Australia’s (RBA) concerns over inflation is a private survey showing price pressures have peaked.

“Today’s data supports the case for another cut in rates, adding a little more weight to the case for a larger than normal 50 basis points at tomorrow’s RBA board meeting,” NAB Capital senior economist David de Garis said.

The central bank broke ranks with its normal quarter of a percentage point moves last month, slashing the cash rate by a full percentage point to six per cent as the global financial crisis deepened.

This followed a 25 basis point reduction in September.

Treasurer Wayne Swan expects all retail banks to pass on any further reduction in the cash rate as quickly as possible, and in full.

“We have volatile markets out there at the moment, I would expect all of the banks to pass on any cut should it be announced tomorrow,” Swan told reporters in Brisbane.

“If they can’t (pass it on) in full, they’d better have a pretty good explanation.”

But he is confident that Australia can continue to record positive economic growth, despite the global financial crisis.

“We are not immune from the fallout of the global financial crisis. You can see that in the data today. But we are in a far better position than any other countries around the world,” he said.

The government’s worries were backed by a slump in job advertising in the past six months, suggesting unemployment could start rising quickly.

The ANZ’s job advertisement series shows newspaper ads tumbled 12.2 per cent in October and by a massive 34.7 per cent from a year ago, the weakest outcome since 2001.

TD Securities senior strategist Joshua Williamson said he had been forecasting a 6.3 per cent jobless rate by the end of 2009.

“This estimate may be now on the conservative side,” he said.

Opposition treasury spokeswoman Julie Bishop said the government had “dropped the ball” on unemployment.

“We know that in the budget they forecast 134,000 job losses within the next 12 months. We know that economic conditions have worsened considerably since then,” she told reporters in Perth.

The jobless rate was 4.3 per cent in September.

Economists expect it will tick up to 4.4 per cent when October data is released on Thursday.

Official data was just as grim, with house prices in six of the nation’s eight capital cities recording falls in the September quarter for a slim 2.8 per cent increase on average over the year – the slowest pace in nearly three years.

Consumer spending also fell by a seasonally adjusted 1.1 per cent in September as the boost from the July 1 tax cuts and lower petrol prices faded.

However, the TD Securities-Melbourne Institute annual inflation gauge for October fell below four per cent for the first time since January.

The official consumer price index was five per cent in the year to September, well above the RBA’s two to three per cent target.