The Reserve Bank of Australia has left official interest rates on hold at 1.5 per cent as low inflation, stubborn wages growth and a slowing economy weigh on policy makers.

The decision came as the central bank cut its annual economic growth forecast to around 3 per cent, from 3.5 per cent, and said downside risks to the economy had increased.

Financial markets put the chance of a cut in official interest rates by the Reserve Bank at better than 50 per cent by year's end. Credit:Louie Douvis

Rates have now been on hold at the record low for 30 months straight, but financial markets are predicting the next rate move is more likely to be a cut than a hike as declining house prices impact on household spending.

RBA governor Philip Lowe said growth in household income had been low over recent years, but was expected to pick up and support household spending.