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Cutting interest rates could be less effective at boosting the local economy than it did in the past, Reserve Bank of Australia governor Glenn Stevens said on Friday.
Addressing federal politicians at the biannual House of Representatives Economics Committee meeting in Sydney, Stevens said interest rate cuts would still be implemented due to rising unemployment and low inflation.
The central bank cut the official cash rate to a record low of 2.25 percent last week, but Stevens said that rate cuts seem to be less effective at stimulating the economy.
"The board is also very conscious that, at this point, monetary policy's power to summon up more demand with lower interest rates could be less than it used to be," the central bank governor said.
Stevens said the falling Australian dollar was following the central bank's predictions, which estimated the local currency to hover below 75 U.S. cents, and would benefit Australian exporters.
"The exchange rate is more or less doing what you would expect it to do," he said. "But I can certainly think of reasons why it might go down some more."
"The lower exchange rate is likely to help export volumes outside the resources sector, and of late better trends have been observed in some services export categories including tourism and education."
Australia's recent unemployment figures of 6.4 percent, representing a 12-year high, was not such a negative picture, he said.
"We need to step back from monthly ups and downs, because there 's always going to be those, and try to distill what the trend is, " Stevens said.
"What that trend is, in our view, is that the unemployment rate has been incrementally edging up by about a tenth of a percentage point per quarter, I think that is still happening, and I think that will keep happening for a little while yet."
"By the historical standards of my professional career that remains low, but it's going up not down, we can sustain lower rates of unemployment than this in my opinion and we should be seeking to do so."
