Interest rates will also remain on hold for at least another month, but the Reserve Bank of Australia is flagging more potential cuts in coming months.

The latest economic data shows Australia is exporting heavily, particularly to China, but demand for imports has fallen four per cent in a month.

Australian Bureau of Statistics data released on Tuesday shows the national trade surplus is now at a record $8 billion, with exports climbing one per cent from May to June.

"Export earnings have been boosted by higher commodity prices, while import volumes are soft at a time of weak domestic demand and with the lower dollar making imports more expensive," Westpac's Andrew Hanlan said on Tuesday.

But the number of new housing approvals dropped 1.3 per cent from May to June, a fall of more than 20 per cent compared to June 2018.

There were 14,501 new dwellings approved nationwide in June, with apartment numbers dropping 29 per cent compared to the same point last year.

The drought also is hurting sheep and lamb numbers, with the number of sheep slaughtered down 13 per cent over the past year, and lambs down 9.3 per cent.

The RBA left the official cash rate on hold at one per cent, but signalled more cuts could be necessary to force inflation up.

"It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target," the RBA said.

"The Board will continue to monitor developments in the labour market closely and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time."

The bad news for the economy came as the Australian share market shed nearly two months of gains in the first half-hour of trade, plummeting more than 2.5 per cent following significant losses on Wall Street.

The market turmoil, sparked by escalating US-Chinese trade tensions, appeared to flare up after the US Treasury Department said it had determined for the first time since 1994 that China was manipulating its currency.

Analysts said Australia was so far relatively insulated from the trade war, assuming Chinese demand doesn't soften too much.

"Export shipment volumes from major Australia ports are back at record highs and continue to signal Chinese demand for iron ore/coal is still robust," J.P. Morgan's Tom Kennedy said.

Australian Associated Press