The Reserve Bank of Australia has trimmed interest rates nearly in half in recent months in an effort to stimulate the economy - but the central bank won't ruled out still more rate cuts if the situation warrants it, the RBA said on Friday in its quarterly statement on monetary policy.
The RBA said that unemployment is expected to rise and GDP is likely to remain below trend at 2.5 percent - while inflation figures to remain comfortably low at 1.5 to 2.5 percent, all of which adds to the case for further stimulus.
But the bank - which cut rates by 25 basis points in August - wants to make sure it allows enough time for the stimulus to work its way into the economy.
"The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time," the RBA said.
Over the past two years, the central bank had pared the benchmark lending rate by 225 basis points to 2.50 percent.
The global economy has been largely unchanged, the bank said, with modest growth in China and the United States - although downside risks remain in Europe.
"Globally, inflation pressures are contained and monetary conditions remain highly accommodative in most economies," the RBA said.
The bank also noted the great appreciation of the Australian dollar over the past decade, due in large part to higher commodity prices that fueled mining investment.
"But commodity prices have fallen since their peak two years ago, and mining investment has begun to decline from the record level reached this past year. The exchange rate depreciated earlier this year, but has since retraced some of that decline, in large part reflecting the influence of developments offshore," the RBA said.
Mining investment has now been revised lower. The housing market likely to remain soft, the bank said, and wage growth is at its slowest in more than a decade.
Non-mining investment is also likely to remain weak, although that is partially offset by surveys that show an improvement in business confidence and conditions.
"It is too early though to know whether this improvement will be sustained and the extent to which businesses might be encouraged to take on new risks, increase investment and add to employment," the RBA said.
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