Australia's house prices, which recorded their smallest quarterly rise since early 2009, reinforce speculations the Reserve Bank of Australia will keep interest rates on hold this week.

The Australian Bureau of Statistics house price index edged up by a mere 0.1 per cent in the September quarter, for an annual rate of 11.5 per cent, a significant decline from 16.3 per cent in the year to June.

While economists had expected house prices to remain steady over the September quarter, prices in five capitals slumped, with Brisbane posting the biggest decline of 2.1 per cent.

Economists are split as to whether the central bank will raise the cash rate for the first time since May as a pre-emptive strike against expected inflation pressures, or sit pat for another month.

But a gauge of consumer prices showing a pick up in price pressures in October after a run of subdued months, likely means the inflation-wary Reserve Bank will keep the door open to further policy tightening.

"The data showed house prices have moderated ... and really just reinforces the Reserve Bank will probably pass tomorrow. But we don't think we're out of the woods in terms of rate hikes," said John Peters, senior economist at Commonwealth Bank.

The RBA meets on Tuesday and is widely expected to hold interest rates steady at 4.5 percent for a sixth month running, a Reuters poll taken on Friday showed.

Official data last week showing a key measure of underlying inflation ran at a five-year low of 2.5 percent, bang in the middle of the RBA's target band of 2-3 percent, had prompted markets to slash the risk of a move this week.

The majority of respondents, however, believed the RBA will deliver a 25 basis point rate hike before the year is out.

With Reuters