The Australian Bureau of Statistics (ABS) reported on Monday that Australia's producer price index ( PPI) at the final stage of production rose 0.3 percent in the December quarter 2011.

Figures from the ABS also showed the PPI at the final stage of production rose 2.9 percent through the year to the December quarter 2011.

Economists had expected a 0.4 percent rise for the December quarter.

The ABS said the PPI was also up 0.3 percent at the intermediate stage and 0.4 percent at the preliminary stage.

Australian economists say the weaker-than-expected PPI result increases the chance of another rate cut.

Commonwealth Bank senior economist John Peters said the data provided a "curtain-raiser" for Wednesday's consumer price index (CPI), seen as the key measure of inflation.

Peters said the weaker-than-expected PPI result was reflective of an overall downward trend in inflation, although there was little correlation between the PPI and CPI.

He expects Wednesday's CPI figure to be low enough to allow the Reserve Bank of Australia (RBA) to cut the official interest rate in February.

"We certainly think the door is well and truly open for a rate cut and the CPI won't stand in the way," Peters said.

National Australia Bank chief economist Alan Oster said the PPI data suggested the CPI data due out on Wednesday may also be lower than market forecasts.

He said a lower rate of inflation may add to the case for interest rates to come down further.