WRAPUP 1-Australia inflation turnaround sanctions rate cuts

* TD-MI inflation gauge falls by record in Nov

* Manufacturing activity slumps to new lows

* RBA seen cutting rates by at least 75 basis points

By Wayne Cole

SYDNEY, Dec 1 (Reuters) - Australian inflation is slowing much faster than earlier thought while manufacturing activity hit record lows in November, strengthening the case for a steep cut in interest rates this week.

The Reserve Bank of Australia (RBA) holds its monthly policy meeting on Tuesday and is considered almost certain to cut its 5.25 percent cash rate by at least 75 basis points. The central bank has already cut borrowing costs by 2 percentage points since September in an increasingly urgent effort to stave off recession.

Data out on Monday highlighted the urgency. A private gauge of inflation fell in November by its biggest ever margin while a manufacturing survey showed the biggest contraction in 16 years.

"We suspect a move of 100 basis points is more likely now," said Michael Workman, a senior economist at Commonwealth Bank. "With inflation slowing more quickly than expected, there's really no harm in being aggressive to support growth."

Nor will the RBA be alone. The European Central Bank, Bank of England and Reserve Bank of New Zealand are all expected to cut rates this week in a global campaign to revive growth.

Australia's Labor government is also playing its part. Over the weekend, it announced extra spending on hospitals and schools worth A$15 billion ($9.8 billion) over five years. That comes on top of a A$10.4 billion stimulus package due to fatten wallets this month.

The economy needs all the stimulus it can get. Figures on gross domestic product due on Wednesday are expected to show growth of just 0.2 percent in the third quarter, with some risk of an outright contraction.

Indeed, data on business inventories on Monday suggested they made no contribution to growth last quarter when analysts had generally looked for them to add 0.2 percentage points.

Business sales were also soft in the quarter and while gross operating profits rose a healthy 5.2 percent, much of that was from the mining sector and is unlikely to be repeated as commodity prices fell steeply in recent months.

"Sales were pretty weak in the quarter and inventories provided no upside for GDP," said Brian Redican, a senior economist at Macquarie.

INFLATION RETREAT

The sharp slowdown in domestic demand has cooled inflation more quickly than many had expected.