Official interest rates are set to be cut to half a percent by early next year as the Reserve Bank of Australia struggles to get unemployment down, Westpac has warned amid growing concerns about the state of the global and domestic economy.

Westpac chief economist Bill Evans on Wednesday said the RBA, which has cut official rates to an all-time low of 1 per cent, will struggle to meet its own targets around the jobless rate and wages growth without a further easing in monetary policy.

Westpac chief economist Bill Evans has predicted the RBA will slice the official cash rate to 0.5 per cent by February Credit:Lisa Maree Williams

Mr Evans said the Reserve was likely to hold rates at its meeting in the first week of August but beyond that there seemed little option but for it to continue slicing the cost of money. A quarter percentage point cut by October and then a follow-up reduction at its February meeting were now likely.

"Our forecasts of inflation and unemployment emphasise the extent of the challenge faced by the RBA in boosting demand and wages and reaching their own targets," he said.