The Reserve Bank is open to more interest rate cuts despite leaving the cash rate steady on Tuesday.
The benchmark cash rate remains at 2.25 per cent after the RBA board's monthly policy meeting, contrary to the expectations of most economists. But it has not closed the door on more cuts.
"Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the (two to three per cent on average) target," the RBA said.
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Not that the central bank seems to think more cuts would make much difference - at least not enough to justify the risks it would entail.
The RBA singled out the Sydney housing market as a pressure point for policy, although it has other asset markets on its radar.
"The bank is working with other regulators to assess and contain risks that may arise from the housing market," it said.
"In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates."
At the same time, the RBA appears resigned to accepting a longer interval of below-normal economic growth and further rises in unemployment.
"The economy is likely to be operating with a degree of spare capacity for some time yet," the RBA said.
By "spare capacity", the RBA is referring mainly to unemployment, so the message is that unemployment, perhaps higher than the current 6.4 per cent, will be with us for an extended period.
While this acceptance of persistently higher unemployment may be in part due to the RBA's fears of inflating a bubble in housing prices, or the prices of other financial assets, it is also an acknowledgement of the limitations of monetary policy.
There is only so much that low interest rates can do. Another cut could help to lower the exchange rate, which the RBA said would probably have to fall in order to achieve "balanced growth" in the economy.
But the absence of a cut this week suggests the RBA does not think another cut will make much difference.
AAP
TIMELINE: Australian rate changes since 1990
The following is a chronology of the Reserve Bank of Australia's interest rate moves since 1990. Each move is measured in basis points (bp), which are one-hundredths of a percentage point.
Feb 3 2015 Down 25 bp to 2.25
Aug 6 2013 Down 25 bp to 2.50
May 7 2013 Down 25 bp to 2.75
Dec 4 2012 Down 25 bp to 3.00
Oct 2 2012 Down 25 bp to 3.25
Jun 5 2012 Down 25 bp to 3.50
May 1 2012 Down 50 bp to 3.75
Dec 6 2011 Down 25 bp to 4.25
Nov 1 2011 Down 25 bp to 4.50
Nov 2 2010 Up 25 bp to 4.75
May 4 2010 Up 25 bp to 4.50
Apr 6 2010 Up 25 bp to 4.25
Mar 2 2010 Up 25 bp to 4.00
Dec 1 2009 Up 25 bp to 3.75
Nov 3 2009 Up 25 bp to 3.50
Oct 6 2009 Up 25 bp to 3.25
Apr 7 2009 Down 25 bp to 3.00
Feb 3 2009 Down 100 bp to 3.25
Dec 2 2008 Down 100 bp to 4.25
Nov 4 2008 Down 75 bp to 5.25
Oct 7 2008 Down 100 bp to 6.00
Sep 2 2008 Down 25 bp to 7.00
Mar 4 2008 Up 25 bp to 7.25
Feb 5 2008 Up 25 bp to 7.00
Nov 7 2007 Up 25 bp to 6.75
Aug 8 2007 Up 25 bp to 6.50
Nov 8 2006 Up 25 bp to 6.25
Aug 2 2006 Up 25 bp to 6.00
May 3 2006 Up 25 bp to 5.75
Mar 2 2005 Up 25 bp to 5.50
Dec 3 2003 Up 25 bp to 5.25
Nov 5 2003 Up 25 bp to 5.00
June 5 2002 Up 25 bp to 4.75
May 8 2002 Up 25 bp to 4.50
Dec 5 2001 Down 25 bp to 4.25
Oct 3 2001 Down 25 bp to 4.50
Sept 5 2001 Down 25 bp to 4.75
Apr 4 2001 Down 50 bp to 5.0
Mar 7 2001 Down 25 bp to 5.5
Feb 7 2001 Down 50 bp to 5.75
Aug 2 2000 Up 25 bp to 6.25
May 3 2000 Up 25 bp to 6.0
Apr 5 2000 Up 25 bp to 5.75
Feb 2 2000 Up 50 bp to 5.5
Nov 3 1999 Up 25 bp to 5.0
Dec 2 1998 Down 25 bp to 4.75
Jul 30 1997 Down 50 bp to 5.0
May 23 1997 Down 50 bp to 5.5
Dec 11 1996 Down 50 bp to 6.0
Nov 6 1996 Down 50 bp to 6.5
Jul 31 1996 Down 50 bp to 7.0
Dec 14 1994 Up 100 bp to 7.5
Oct 24 1994 Up 100 bp to 6.5
Aug 17 1994 Up 75 bp to 5.5
Jul 30 1993 Down 50 bp to 4.75
Mar 23 1993 Down 50 bp to 5.25
Jul 8 1992 Down 75 bp to 5.75
May 6 1992 Down 100 bp to 6.5
Jan 8 1992 Down 100 bp to 7.5
Nov 6 1991 Down 100 bp to 8.5
Sep 3 1991 Down 100 bp to 9.5
May 16 1991 Down 100 bp to 10.5
Apr 4 1991 Down 50 bp to 11.5
Dec 18 1990 Down 100 bp to 12.0
Oct 15 1990 Down 100 bp to 13.0
Aug 2 1990 Down 100 bp to 14.0
Apr 4 1990 Down 100-150bp to 15.0 to 15.5
Feb 15 1990 Down 50 bp to 16.5 to 17.0
Jan 23 1990 Down 50-100bp to 17.0 to 17.5
Reuters
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