SYDNEY: Australia's central bank Tuesday held interest rates at a record low of 2.0 percent, but kept the possibility of further cuts on the table as it monitors the possible negative impact of global market volatility on domestic demand.
The Reserve Bank of Australia has slashed the cash rate 275 basis points since November 2011 to boost the economy as its charts a rocky path away from a dependence on mining.
After its policy meeting Tuesday it said "there were reasonable prospects for continued growth in the economy, with inflation close to target".
The RBA noted signs of improvement in the Australian economy, including recent falls in the jobless rate and a pick-up in business lending.
But it cautioned about the state of the global economy, including weak growth in developing nations, declining commodity prices and volatility across financial markets.
"Over the period ahead, new information should allow the board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand," RBA governor Glenn Stevens said in a statement after the meeting.
"Continued low inflation may provide scope for easier policy, should that be appropriate to lend support to demand."
The Australian dollar rose to 71.29 US cents after the announcement from 71.06 cents, but soon retreated to below 71 cents.
While Australia has avoided falling into recession for 24 years, the economy has been hurt by the growth slowdown in China, its largest trading partner.
Spending by non-mining industries has yet to fill the gap left by the end of an unprecedented resources investment boom, while the jobless rate peaked at a 12-year high of 6.4 percent last year before improving.
Australia has also been hit by soft inflation figures, a trend experienced by other developed economies owing to falling energy prices.
"We don't know yet that the volatility in (financial) markets is going to have an impact on growth," Deutsche Bank's chief economist for Australia Adam Boyton told AFP.
"If you are entering that sort of environment with a falling unemployment rate, you've got plenty of time to get some more data and have a look."
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