Interest rates are heading for unprecedented lows below 1% and the Reserve Bank could even be forced into extraordinary measures such as money printing to stimulate the struggling economy, forecasters believe.

The governor of the Reserve Bank, Philip Lowe, raised expectations that the cash rate will be cut again next month when he said on Thursday that “the possibility of lower interest rates remains on the table”.

It prompted forecasters to price in a 0.25% reduction in the cash rate at the bank’s next monetary policy meeting in July or in August.

The dovish comments also raised the prospect of more reductions in the borrowing rates of Australia’s millions of mortgage holders, with some market watchers tipping home lending rates to fall to 3%.

But as policymakers grapple with powerful global financial forces pushing borrowing rates ever lower, many economists believe that Lowe and his colleagues will slash the cash rate to 0.75% by the end of the year.

The Reserve Bank could also resort to quantitative easing of the type seen in the US, Britain and Europe after the global financial crisis. QE involves central banks buying up government bonds to pump money into the financial system and lubricate the economy.

NAB economists brought forward their expectations of a cut to July from August and said the deteriorating economy would force the bank to keep on acting, perhaps even introducing QE in 2020.

“We still see a strong case for the Reserve Bank to do even more on policy and expect another cut to 0.75% in November, with the risk of alternative monetary measures in 2020,” they said in a note.

Chris Weston, strategist at Pepperstone, a forex trader in Melbourne, said the market indicators were already predicting rates to land at between 0.5% or 0.75%.

“If rates go below 1% we start talking about a currency at what point do we talk about QE?” he said. “So forget about rate hikes for a long period of time.”

Addressing a Committee for Economic Development of Australia event in Adelaide, the RBA governor said it was “not unrealistic to expect a further reduction in the cash rate” as he attempts to keep unemployment in check and boost inflation.

But he warned that another 0.25% cut in the cash rate could not be expected to “materially shift the path we are on” and said the government had to put its shoulder to the wheel.

Monetary policy in the form of rate cuts was “not the only option”, he said, and called on the government to step up fiscal stimulus through infrastructure spending and “structural policies that support firms expanding, investing, innovating and employing people”.

Although the RBA has repeatedly said it is cutting rates to reduce the spare capacity in the labour market and thereby help push up wages, it is being buffeted by world currents beyond its control.

The US Federal Reserve signalled this week that it will begin cutting rates next month, which will force central banks such as the RBA to fall into line. The European Central Bank has also said it will revert to its “whatever it takes” policy to keep the eurozone economy alive.

The Fed’s forward advice pushed the yield, or interest rate, on US 10-year government bonds below 2%, an historic portent of recession and a level that indicates interest rates are likely to remain low for a long period.

Yields on Australian 10-year bonds fell to a record low of 1.3% and although the Australian dollar rallied due to a weaker greenback, many observers expect it will fall as the RBA hacks away at the cash rate.

An independent economist, Lindsay David, of LF Economics, said he would favour a move to QE before any rate cuts because it would have more impact on the economy, which was suffering under the strain of falling property prices.

He said the RBA governor’s remarks betrayed serious concerns. “Something severe must be happening for the RBA to be firing the few bullets they have left. Australia is facing recessional headwinds.”

Stock markets around the world – and in Australia – responded positively to the prospect of lower rates with cheap money likely to be thrown at buying shares in the hope of higher yields than those on offer from banks.

Wall Street’s S&P 500 leading index is close to an all-time high while the ASX200 in Australia rose for the third straight day to close at a new 11-year high of 6,687.4 points.

While falling rates are bad news for savers, they could be very welcome for indebted homeowners and the wider housing market.

Weston said if super-low rates were passed on to borrowers it could fire up the property market by making homeowning a cheaper option than renting: “At what level of rates do we start saying that housing is a great investment? With very low rates, owning a home could be lower than renting. The dynamic could shift in favour of housing.”

Sally Tindall, research director at the comparison website RatesCity, said: “Currently the lowest variable rate is 3.09% so if there’s another rate cut this year, there is every chance some variable rates will drop below 3%, and we could potentially see the lowest rate drop to 2.84%.”