Sagging commodity prices and global trade concerns undercut the Australian economic outlook in April, according to the Westpac-Melbourne Institute Leading Index, released Wednesday.

The six-month annualized growth rate in the Leading Index, which indicates the likely pace of economic activity three to

nine months into the future, "slowed to 0.2% in April from

0.5% in March," reported Westpac.

The tempered Leading Index reflects uncertainty around global trade and a "less supportive commodity price backdrop," said Westpac.

However, while most of the drag on the April Leading index was external, the "domestic drivers are also fairly mixed with labor market momentum slowing and interest rate settings providing only modest support," advised Westpac.

The Australian economic picture shows some stalling in what was already expected to be a gradual growth recovery for the Australian economy in 2025, said Westpac.

As a result of recent Leading Index trends and other factors, Australia's gross domestic product is expected to expand by a modest 1.9% on year in 2025, "a sub-par result by historical standards," said Westpac.

Leading Index components that weakened in April include consumer economic and unemployment expectations, a softening national stock market, a slowing housing outlook, and shorter work hours.

Westpac noted that the Reserve Bank of Australia (RBA) reduced its key policy interest rate to 3.85% from 4.10% on Tuesday.

At the next central bank meeting the RBA may hold steady, said Westpac.

"The RBA Monetary Policy Board next meets on July 7-8. As expected, the Board lowered the cash rate target by 0.25% to 3.85% at its May meeting, citing increased confidence around inflation and an expectation that international developments would exert some drag on the economy," said Westpac.

But the signals of an Australian economic slowdown, or softening inflation, are not strong enough to provoke the RBA to cut rates again at its next policy session, said Westpac.

We "continue to expect the RBA to take a cautious, measured approach to policy easing with the meeting in early July likely to see policy left on hold as it awaits another quarterly update on inflation on July 30," advised Westpac.