China's devaluation of the yuan should be welcomed, Reserve Bank boss Glenn Stevens says.
Mr Stevens has been surprised by the world's reaction to China's "quite small" reference rate cuts over the past six months.
He says Chinese policy was helping make the yuan exchange rate more flexible, which the world had been telling them to do for years.
Mr Stevens called their recent policy focus on the yuan rate "eminently sensible".
"If they're heading towards a world where there's more market flexibility in those key prices in the longer run, that's to be welcomed even though the road ... may have some bumps and potholes in it," he told a parliamentary hearing on Friday.
"So I think we shouldn't overreact to these changes."
However, the RBA boss was concerned about Chinese policymakers' abilities to manage their country's wider economic transition given their less successful interventions to halt stock market falls recently.
"Like the rest of us they can't fix every problem and sometimes they struggle to get the response exactly right and sometimes it proves more difficult to engender confidence," Mr Stevens said.
"They're in the same boat as everybody else."
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