CANBERRA - AUSTRALIA will not fall into recession, the finance minister said on Tuesday as economists predicted the central bank will cut interest rates.

The Reserve Bank of Australia is expected to announce on Tuesday that the key cash rate will be reduced from the current 5.25 per cent in its latest acknowledgment that the Australian economy is slowing.

The bank has cut the rate at it last three monthly meetings by 0.25 of a percentage point in September, an entire percentage point in October, then by 0.75 of a percentage point in November.

Finance Minister Lindsay Tanner said he expected recent rate cuts combined with billions of dollars in government spending and a relatively weak Australian dollar will encourage exports and stimulate the Australian economy.

'We don't believe we'll head into recession; we've got also very strong stimulus now in the pipeline,' Mr Tanner told Australian Broadcasting Corp. radio.

Mr Tanner played down the impact of the US National Bureau of Economic Research report on Monday that the US economy has been in a recession since December 2007.

'It's not exactly big news that the US is in economic difficulties,' Mr Tanner said.

'This is a central part of a spreading global downturn that is putting substantial negative pressure on Australia's economy.'

While Australia has enjoyed more than 17 years of economic growth fed by Chinese demand for minerals and energy, an index of economic trends reported last week that the outlook for the Australian economy is at its weakest in 20 years.

The annualized growth rate of the index, compiled by Westpac Banking Corp. and the Melbourne Institute, fell to 1.1 per cent in September from 3.5 per cent in August. -- AP