Westpac Banking (ASX:WBC, NZE:WBC) cut Australia's growth outlook to 1.9% from its previous forecast of 2.2% due to a weaker external environment and slower recovery in consumer demand, according to a Monday statement.

"With a low direct exposure to the US tariffs and China's response limiting the indirect effects, the shock to Australia looks likely to be relatively small and manageable,"​ the statement added.

However, the bank said that the market must "not be complacent" as the situation is considered to be "far from over."

The bank continues to expect three more 25 basis points rate cuts from Australia's central bank this year but "risks have tilted to the downside," according to the statement.

However, the bank said China's growth outlook remains "resilient" and continues to expect 5% growth this year.

For the US, tariffs and the US economy's capacity constraints will result in elevated consumer inflation of at least 3.5% within the year and about 3% in 2026, the bank expects.

The bank expects a production gross domestic product rise of 1% for New Zealand for the current fiscal year and a full fiscal year real GDP growth of 1.8% for Australia.