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HOUSE prices have suffered their biggest quarterly fall since 1978 while newspaper job ads have slumped by a recession-like 35 per cent over the year.

But relief is on its way today for mortgage-holders, with the Reserve Bank expected to cut official interest rates at 2.30pm, most likely by half a percentage point.

This would mean a saving of $133 a month on repayments for a $400,000 home loan and, if passed on in full, bring the average standard variable mortgage rate back to 7.84 per cent, the lowest since August 2006.

The Reserve is keen to bring interest rates back to a more neutral level to shelter households from the global economic storm and prevent a recession.

Growth in this economy and jobs are under direct threat from the global financial crisis, the Prime Minister, Kevin Rudd, said. It will be tough, it will be difficult, it will be hard, it will be ugly.

But amid rising fears of recession, Treasury forecasts to be released next week are expected to show growth staying positive.

The Treasurer, Wayne Swan, sought to head off panic about falling home prices yesterday, insisting a shortage of housing and the increase to the first home-buyers\' grant would stabilise the market.

Some economists are tipping that large interest rate cuts, along with tumbling share prices, will spark another housing boom such as the one that followed the 1987 sharemarket crash.

The Treasurer and the Prime Minister both urged banks to pass on today\'s rate cut as rapidly as possible.

Meanwhile, in a sign that inflation may have peaked, a survey by TD Securities and the Melbourne Institute found consumer prices fell 0.2 per cent last month - the first drop since February 2006. This was due to lower prices for produce, holidays and household services.

Average rents fell 1 per cent, taking the annual pace of rental increases back to 12 per cent, from a July peak of 15 per cent.

Fuel prices are tumbling, too, with a service station in Sans Souci charging 116.9 cents a litre for unleaded petrol yesterday - a level not seen in more than a year.

But sharemarket falls and growing uncertainty saw retail sales contract 1.1 per cent in September. NSW was the only state in which shoppers spent less than a year ago, with sales down 3 per cent over the year - the weakest performance since 1993.

Sydney house prices fell 1.8 per cent in the three months ended September - matching the national average.

Economists have warned of further falls if the jobless are forced to sell their homes.

If businesses were to initiate major job-shedding … the result would inevitably be … weaker consumer demand, lower corporate profits, rising mortgage delinquencies and defaults, and falling house prices, the ANZ economist Katie Dean said.

The fall in job ads measured by ANZ last month was the biggest since 2001 - when Australia narrowly avoided a global recession.

An Macquarie Bank economist, Rory Robertson, warned it may be too late to avoid a recession. Despite lower interest rates, fiscal stimulus and the weaker Australian dollar, avoiding recession will be no mean feat, if indeed one has not already begun.