Australia's economy has suffered a significant loss of momentum since the start of the year as its transition away from being a mining investment gets bumpy.
The Westpac/Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 3.2 per cent in August, down from four per cent in July but marginally above its long term trend of 2.9 per cent.
The coincident index, which gives an indication of current economic conditions, was 2.4 per cent above its long term trend of 2.9 per cent.
"Although the growth rate in the leading index remains slightly above trend, it has slowed abruptly over the last six months," Westpac chief economist Bill Evans said.
"Some months ago the index was pointing to significantly above trend growth in 2013 but this current slowdown is more consistent with Westpac's growth forecasts," he said.
Mr Evans said Westpac is not expecting the Reserve Bank of Australia to cut the cash rate at its November 5 board meeting after reducing it to a new record low of 2.5 per cent in August.
Westpac's forecast is for a quarter of a percentage point cash rate reduction in February and another in May.
"The loss of momentum evident in today's Leading Index report suggests the RBA's 25 basis point rate cut in August was a timely shot in the arm for growth," Mr Evans said.
"However, we expect further boosts will be required to support momentum through the difficult transition from mining to non-mining led growth."Westpac expects the Australian economy to grow by 2.5 per cent in 2013 and by 2.3 per cent in 2014.