Loading

It similarly slashed its inflation forecast for the same period from 2 to 1.25 per cent.

Its annual GDP and inflation forecasts for the year to June 2020 were cut from 3.25 and 2.25 per cent to 2.75 and 2 per cent respectively.

The RBA cited slowing growth in other advanced economies, sluggish consumer spending and the ongoing property market correction.

"This reassessment of the outlook for consumption is informed by the downward revision in the national accounts and, to some extent, the recent declines in housing market activity," the RBA said in the quarterly statement.

"The outlook for household consumption growth continues to be one of the key sources of uncertainty for the domestic growth forecasts, particularly given uncertainties around the outlook for income growth and how developments in housing markets will affect household decision-making."

The Australian dollar, which was worth 72.95 US cents on January 31, slipped from 70.99 just before the statement was released to 70.65 at 1220 AEDT.

Loading

RBA governor Philip Lowe this week abandoned a policy tightening bias and instead sees the chances of an interest-rate cut or a hike as "more evenly balanced".

While the jobs market remains a source of strength, a slew of weaker data in the past two months - mainly connected to the deteriorating housing market - forced the RBA to adjust its stance.

Loading

It was taken aback by the statistics bureau revising down annual consumption growth by about 0.2 percentage point for the past three years and as a result "the starting point for GDP growth forecasts is three-quarters of a percentage point lower than previously expected".

The central bank is persisting in its view that a stronger labour market will eventually lead to faster wage growth and a pick-up in inflation to within the 2-3 per cent target range.

The forecasts show core inflation reaching 2 per cent at the end of this year and headline inflation reaching there in mid-2020. Headline inflation is predicted to slump to 1.25 per cent in the year through June this year due to lower oil prices.

The central bank estimated that a sustained 15 per cent fall in oil prices would cut about half a point from CPI and could "cumulatively" lower core inflation by a quarter point through indirect effects over two to three years.

The RBA is concerned about the increasing number of factors that could disrupt its central scenario, including offshore. Downside risks to the global outlook have increased, it said, noting trade tensions "are beginning to affect the level and pattern of trade".

It said a range of indicators "suggest a more pronounced slowing" of momentum in China. Some of that stems from efforts to rein in shadow financing as well as the impact of tariff increases. Australia is the most China-dependent economy in the developed world.

AAP and Bloomberg