Focus on Reserve Bank after benign consumer price index outcome

Economists and financial markets will be debating the risk of an interest rate cut all the way up to next Tuesday's Reserve Bank board meeting.

It will be the central bank's first gathering this year and will come just days after Australia posted its lowest inflation rate in nearly three years.

At 1.7 percent, the consumer price index released on Wednesday is below the RBA's two to three percent inflation target.

This was partly the result of lower petrol prices.

However, the CPI was accompanied by higher then expected levels of underlying inflation, the RBA's preferred measure of price pressures.

Talk of a rate cut comes at a time of sluggish economic growth, high unemployment, subdued confidence and rate cuts by central banks in other parts of the world.