Growth prospects are disappointing beyond the current calendar year and there's little the Reserve Bank of Australia can do to help, Westpac says.
The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, fell to 1.17 per cent in March, from 1.14 per cent in February.
Westpac chief economist Bill Evans said the index indicates economic growth in the current calendar year will be consistent with the RBA's forecast of three per cent.
"That growth rate is above trend and consistent with the positive leads from the Index over the last eight months," he said.
However, Mr Evans warned there were concerns about growth before this year, with prospects for growth in 2018 looking discouraging.
"Housing construction is likely to be contracting through 2018 while export growth will slow and the terms of trade are likely to be falling, slowing nominal income growth," he said.
"Prospects for an offsetting boost from household spending and business investment are not encouraging given the ongoing negative feedback loop from weak labour incomes to consumption and final sales."
Mr Evans said despite the concerns about growth prospects next the RBA was certain to keep interest rates on hold at a record low of 1.5 per cent at its next meeting on May 2.
He said while growth could possibly be supported by an even lower cash rate, the central bank far too concerned about rising household debt and housing prices to shift the rate any lower.
"The authorities are therefore opting for a policy mix of steady official rates and heightened regulatory controls around the housing market," Mr Evans added.
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