The latest minutes from the Reserve Bank show Australia's central bank is set to cut interest rates if the economic outlook worsens and underlying inflation remains weak.

Earlier this month, the Reserve Bank kept the official cash rate on hold at 1.75 per cent noting that was the most "prudent" course of action.

In the minutes from that July meeting, the RBA said the Australian economy is slowing down, the housing market is mixed, the jobs market is weaker and it would prefer to see a lower Australian dollar.

However, the bank also noted that transition from mining to non-mining is taking place.

The RBA said it was closely watching economic data on inflation, home prices and employment.

"The board noted that further information on inflationary pressures, the labour market and housing market activity would be available over the following month and that the staff would provide an update of their forecasts ahead of the August Statement on Monetary Policy," the minuted noted.

"This information would allow the board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate."

The central bank's economic outlook, the Statement on Monetary Policy, is out next month.

The RBA said it thought the decision by the UK to leave the European Union would have only a limited impact on the global economy and a very small impact on Australia.

It noted that returns on government bonds had slumped, with yields on Australian Government bonds reaching a record low of 1.95 per cent on June 24, the largest daily fall since September 2001.

The RBA minutes also noted that a lower turnover of housing, stricter bank lending standards, and restrictions on mortgage lending to foreign investors were dampening demand for home loans.

Economists overwhelmingly tip August rate cut

A rate cut in August is expected by 24 out of 25 economists surveyed by Bloomberg, while markets are pricing in a 64 per cent chance that the cash rate will fall to 1.5 per cent in August.

Paul Dales, Australia and New Zealand chief economist at Capital Economics, said the minutes suggested that another rate reduction was very likely.

RBA minutes show rate cut to 1.5 per cent is (almost) in the bag.

"The minutes of the Reserve Bank of Australia's July meeting confirm what the financial markets already know - that the release of the inflation data for the second quarter on 27th July will probably prompt the RBA to cut interest rates from 1.75 per cent to 1.5 per cent in August."

He thinks that official rates could go even lower because the Australian economy is slowing down.

"The markets have yet to realise that continued low inflation could yet result in rates falling to 1 per cent next year," Mr Dales added.

JP Morgan chief economist Sally Auld agreed that there could be a 0.25 per cent cut in the official cash rate in August, on the assumption that the upcoming consumer inflation figures will be weaker.

"RBA minutes from the July board meeting reinforce the soft easing bias; we expect a 25 basis point cut in August," she said.

"Next week's inflation data are key."

Deutsche Bank's Adam Boyton also thinks the RBA will cut rates again in August.

"For the record, we continue to look for the RBA to ease by 25 basis points in August and by an additional 25 basis points in May next year," he wrote in a note.

The Australian dollar fell after the minutes were released, and it was trading around 75.25 US cents by 3:40pm (AEST).