The Australian economy appears to be losing even more momentum according to Westpac's forward looking Leading Index.

Having grown above average for the first four months of the year, the Leading Index has slumped to below trend growth.

This follows a sharp deterioration in official GDP figures, which recently showed the economy had grown by just 0.2 per cent in the June quarter, the weakest figure in more than two years.

Westpac's chief economist Bill Evans said the index - which indicates the likely pace of economic activity three to nine months in the future - decreased from negative 0.4 per cent in July to negative 1.14 per cent in August.

"This print of the Leading Index is casting some early doubt around the (Reserve) Bank's forecast of 3 per cent growth for 2016," Mr Evans said.

The Westpac-Melbourne Institute Index compiles a selection of variables such as commodity prices, housing activity, stock market movements, hours worked and US industrial production to get a reading of cyclical movements in the economy.

"The recent sell-off in the share market has been particularly important in explaining the sharp fall in the growth rate between July and August," Mr Evans noted.

The positive factors in the survey included expectations of a lift in consumer spending and a "modest" improvement in non-mining investment.

"These positive factors will be partly offset by a much smaller contribution to GDP growth from dwelling investment as the residential building boom reaches its peak," Mr Evans cautioned.

"Today's print points to a likely below trend start to next year," Mr Evans concluded.

The Westpac-Melbourne Institute Leading Index of Economic Activity combines a selection of economic variables that typically lead fluctuations in economic activity into a single measure.