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Bleak forecasts for the global economy from the IMF and the biggest quarterly decline in domestic inflation in more than ten years have paved the way for a substantial rate cut when the Reserve Bank meets next week.

In its World Economic Outlook released overnight The International Monetary Fund (IMF) said the global economy would grow by just 0.5 per cent this year and warned that the financial crisis could intensify should governments not take appropriate action to mediate its effects.

“Unless financial strains and uncertainties are forcefully addressed the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth.”

Official data from the ABS yesterday also revealed that the CPI fell 0.3 per cent in the December quarter, the biggest fall since 1997. This brings the annual inflation rate to 3.7 per cent, compared to five per cent in just the previous quarter.

Shane Oliver, chief economist at AMP Capital said the December quarter CPI confirmed inflation was “yesterday’s story” and gave the green light to substantial rate cuts in the coming months.

AMP expects the RBA to cut the cash rate by 0.75 per cent when it meets next week and to reach 2.5 per cent by mid-2009.

Prospective buyers looking to purchase property by the water could snap up a bargain if they act now.

According to RP Data the global financial crisis, which has seen many highly geared individuals suffer, has resulted in heavy discounting and a sky-rocketing of listings in waterfront properties.

Cameron Kusher, RP Data senior research analyst, said cashed-up buyers looking to snare a bargain may now find many idyllic waterfront properties – particularly in regional coast areas – within their grasp.

RP Data has identified Port Pirie West in South Australia as the cheapest oceanfront suburb in the country where the median house price is just $140,000.

Not far behind is Victoria’s Loch Sport where the median house price is $149,250.

Cheapest waterfront suburbs (median price)

NSW: Corindi Beach (Mid-North Coast) $272,500, Sandy Beach (Mid-North coast) $279,500, Dalmeny (South Eastern) $280,000, Diamond Beach (Mid-North Coast) $282,000, Nambucca Heads (Mid-North Coast) $283,750

VIC: Loch Sport (East Gippsland) $149,250, Toora (Gippsland) $163,750, Golden Beach (East Gippsland) $165,000, Seaspray (East Gippsland) $185,000, Port Albert (Gippsland) $190,000

QLD: Halifax (Northern) $200,000, Rocky Point (Far North) $238,130, Burnett Heads (Wide Bay-Burnett) $271,500, Elliott Heads (Wide Bay-Burnett) $285,000, Cardwell (Far North) $290,000

SA: Port Pirie West (Northern) $140,000, Ceduna (Eyre) $164,250, Port Macdonnell (South East) $165,750, Clinton (Yorke and Lower North) $198,750, Cape Jervis (Outer Adelaide) $206,000

WA: Withers (South West) $270,000, Geraldton (Central) $339,000, Derby (Kimberley) $365,000, Sunset Beach (Central) $370,000, Mandurah (South West) $382,500

TAS: Beechford (Northern) $158,500, White Beach (Southern) $167,000, George Town (Northern) $167,750, Strahan (Mersey-Lyell) $187,500, East Devonport (Mersey-Lyell) $188,500