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Signs of a slump in household spending have raised fears the economy started into 2017 with a whimper, while figures published on Tuesday showed that a decline in export volumes - despite higher global prices for commodities - may have wiped 0.7 percentage points from GDP growth in the first quarter.

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A big unknown is household consumption which surprised with its strength late in 2016, but is being burdened by record-low wage growth and high levels of mortgage debt.

She said the governor's commentary on the labour market had also changed slightly, noting growth in total hours worked remained weak despite stronger employment figures over recent months.

The dollar held firm early on Tuesday after crawling away from an 18-day low against the yen thanks to a bounce in USA yields, while the Australian dollar was steady ahead of a policy decision by the country's central bank later in the day. Inflation is expected to increase gradually as the economy strengthens.

The Australian dollar rose, buying 74.90 USA cents at 2:58pm in Sydney compared with 74.74 U.S. cents prior to the decision.

"Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time", Lowe reiterated Tuesday.

Although CoreLogic had only reported one month of negative dwelling value movements so far, a more sustained trend could mean the RBA considers alternatives to keeping rates on hold, he said. Recent evidence suggests the risks to both are finely balanced.

The long-awaited cooling of east coast house prices may also be starting to feed through.

'They are going to overlook the slowdown in GDP as a temporary blip.

The decision was widely anticipated, with the futures market pricing in a 92 per cent of no change to the cash rate at the close of trading on Friday.

Dr Lowe's post-meeting remarks provided little support for financial market doves betting on further rate cuts, with traders sending the Australian dollar as high as US74.96¢ from a low of US74.57¢ before the meeting.

Paul Dales, chief Australia and New Zealand economist at Capital Economics, downgraded his GDP forecast for Australia to a 0.5 percent quarter-on-quarter contraction.