What a difference a week makes: Australia’s economic growth for the third quarter fell well short of expectations, and now a majority of traders expect the country’s central bank to lower rates as early as March.

According to the Australian Bureau of Statistics, third-quarter gross domestic product (GDP) grew by just 0.3% quarter of quarter, a significant four-tenths of a percentage point below the consensus forecast.

On a year-over-year basis, the country’s economy grew by 2.7%, a marked deceleration from the prior quarter’s growth of 3.1%.

The main culprits, according to economists with Westpac, were a sharper-than-expected contraction in public investment (down two-tenths of a percentage point) and a larger-than-expected contraction in mining investment (also down two-tenths of a percentage point).

The decline in resource sector investment has accelerated amid falling commodity prices. And that’s exacerbated the deterioration in Australia’s terms of trade, which decreased by 3.5% during the quarter.

After posting a USD1.3 billion trade surplus in February as a result of record iron ore exports to China, the Middle Kingdom’s demand for the base metal subsequently waned and prices have fallen precipitously.

Since the country’s trade balance fell back into deficit in April, it’s averaged a deficit of USD1.4 billion per month over the seven-month period that ended in October.

However, Australia tends to post persistent trade deficits over the long term. For instance, over the trailing 10-year period, the trade deficit has averaged USD846 million per month.

Also of note, gross fixed capital formation debited seven-tenths of a point from third-quarter growth, though Westpac did see one bright sign amid the weakness: Investment in machinery and equipment jumped by 7% during the quarter, which the economists see as “an encouraging sign that the economy is gradually rebalancing away from investment in mining projects to more general activity across the services sector.”

Despite the near-term uncertainty, economists expect global economic growth will gather momentum next year.

Still, it will take time for that growth to flow through to Australia’s economy. While economists expect GDP to grow by 3.1% for full-year 2014, growth is forecast to slacken next year, to 2.8%, before rebounding the following year, to 3.2%.

In the meantime, the Reserve Bank of Australia (RBA) is now expected use its monetary largesse to help further stabilize the country’s economy.

The central bank has been in a difficult spot as far as its monetary policy goes. Its rate-cutting cycle has taken the benchmark short-term cash rate to an all-time low of 2.5%. That’s helped boost rate-sensitive sectors such as housing, but has yet to meaningfully boost growth in other sectors of the economy.

Complicating the picture is the fact that Australia’s housing market underwent a relatively shallow correction compared to its developed-world peers, and because prices have risen from a much higher base, they already appear to be in bubble mode.

If the RBA raises rates to deflate the housing bubble, it risks choking off nascent growth in other areas of the economy. But if it cuts rates again, it risks further stoking a bubble that’s already had many observers concerned for well over a year.

But now it appears that one bank official’s recent remarks about having the scope for further rate cuts, if necessary, wasn’t just jawboning.

Westpac says that falling inflation, contracting national incomes, declining commodity prices, and continued weakness in consumer sentiment are now enough to prompt the RBA to lower rates even further.

Last week, futures data aggregated by Bloomberg suggested the next rate cut might not come until the middle of next year, if at all.

But now, futures data suggest a 57% probability of at least a quarter-point cut by March and a 68.2% probability of a cut by April.

Notwithstanding our concerns about the country’s housing market, further monetary easing should help the country find new growth from its non-mining sectors.