RBA content with weak Sept GDP

The Reserve Bank is expecting a downside surprise for growth forecasts, but seems content with the current financial conditions and the economic outlook.

The Reserve Bank Of Australia has held its benchmark interest rate at 1.50 per cent. (AAP)

The Reserve Bank is expecting a negative blip in economic growth at the end of this year but is not overly concerned about it.

The RBA held the cash rate steady at 1.50 per cent on Tuesday, saying it expects inflation to eventually return to target.

Economists have tipped gross domestic product (GDP) to have fallen in the September quarter, with official figures due out on Wednesday, but RBA governor Philip Lowe said the central bank board is expecting the blip.

"Some slowing in the year-ended growth rate is likely, before it picks up again," Dr Lowe said in a statement.

"Further increases in exports of resources are expected as completed projects come on line."

Capital Economics chief economist Paul Dales said the fall in third-quarter GDP was not much of a concern for the RBA because the recent drop in public expenditure came after unusually strong rises in the first half of the year and rising commodity prices would help growth rebound.

"Indeed, the statement noted that higher [commodity] prices are providing a boost to national income," Mr Dales said in a note.

"We and the RBA both doubt that Australia is in recession."

JP Morgan chief economist Sally Auld said the central bank appeared to be comfortable with overall financial conditions and the macro-economic outlook.

However, she noted the experience of the last two years has shown that a lot can change in a short space of time, and if expectations for third-quarter GDP were realised, then the starting point for assessing the growth outlook for 2017 would be weaker than what the RBA envisaged just one month ago.

"For a central bank that will begin 2017 with core inflation at depressed levels and on an elongated forecast return to target, there will be a limit to the number and extent of downward revisions to growth that can be tolerated," Ms Auld said.

"We still see scope for lower rates in 2017, and expect 50 basis points of easing from the RBA in the first half of 2017."