Australia's central bank hopes wiser heads prevail on US trade policy

MELBOURNE: The head of Australia's central bank on Tuesday said past proposals by US President-elect Donald Trump to slap tariffs on Chinese imports would be very bad for the world economy and he hoped "wiser heads" would prevail to prevent that.

Reserve Bank of Australia (RBA) Governor Philip Lowe also said any step back from free trade globally would be harmful to Australia's export-heavy economy.

Answering audience questions at a business dinner, Lowe said the domestic economy was faring reasonably well and there were risks in encouraging households to keep borrowing by cutting interest rates ever-lower.

The central bank has held rates steady at 1.5 percent since last cutting in August.