Westpac (ASX:WBC, NZE:WBC) believes the Reserve Bank of Australia's (RBA) understanding of productivity and supply-side dynamics is shifting, with further internal analysis expected ahead of the August policy meeting and statement on monetary policy, the bank said in a Friday report.

The bank added that RBA's minutes highlighted that tight labor markets may attract more participants, potentially boosting labor supply over time.

Westpac believes that individual monetary policy board members are constrained from pre-empting the full board's view, limiting their ability to guide market expectations between meetings, implying that markets may be caught off-guard more often than in countries like the US, where central banks work harder to avoid surprises.

RBA's approach should not, however, rule out making its own interpretation of the data or its analytical models clearer when misconceptions arise, the report added.

Westpac sees an August rate cut as likely, especially if inflation data matches its estimates.