As many economists predicted, the Reserve Bank of Australia (RBA) kept the official cash rate unchanged at 1.5%. The cash rate has held steady at 1.5% since 2016.

The central bank also cut its annual economic growth forecast from 3.5% to about 3% and said that downside risks to the economy had increased, according to The Sydney Morning Herald.

RBA Governor Philip Lowe said that growth in household income had been low over recent years, but it is expected to rebound and support household spending.

"The main domestic uncertainty remains around the outlook for household spending and the effect of falling housing prices in some cities. GDP growth in the September quarter was weaker than expected. This was largely due to slow growth in household consumption and income,” he said in a statement.

The central bank disclosed that the slowdown in the housing market is affecting both buyers and renters.

“The housing markets in Sydney and Melbourne are going through a period of adjustment, after an earlier large run-up in prices. Conditions have weakened further in both markets and rent inflation remains low. Credit conditions for some borrowers are tighter than they have been,” Lowe said.

The RBA’s decision does not come as a shock, according to Chief Economist Nerida Conisbee.

“There are still very mixed economic data out there – unemployment is now at just 5%, and Sydney has hit its lowest unemployment rate since 1974 when it was 3.5%. The economy is not strong enough for an increase but not weak enough for a cut. GDP growth was strong in June but weaker in September,” she said.

Economists and traders are forecasting that the next rate move is more likely to be a cut than a hike.