Another interest rate cut from the Reserve Bank appears unlikely as it issues an upbeat assessment of the economy.
While the central bank has reduced its economic growth forecasts for the current financial year by half a percentage point, it expects growth will gradually pick up to between three and 4.5 per cent by December 2017.
In its quarterly statement on monetary policy on Friday, the RBA also said the unemployment rate will top out somewhere below its previous forecast peak of 6.5 per cent.
"As has been the case for some time, low interest rates are expected to support a pick up in consumption growth over the forecast period, despite expectations that income growth will remain low," the RBA said.
"Labour force data have shown signs of improvement and measures of business conditions in the non-mining sector are clearly above average."
HSBC Australia chief economist Paul Bloxham said the RBA appears to be more comfortable with the current level of the cash rate.
"We see this as a reflection of the fact that the unemployment rate has been broadly steady over the past year and that the Australian dollar has fallen to levels that are closer to the RBA's own apparent assessment of fair value," he said.
"Importantly, the RBA's own forecasts now suggest that the unemployment rate may have passed its peak."
The RBA said the unemployment rate will peak somewhere below 6.5 per cent because there will be fewer people entering the workforce due to lower population growth from a lower immigration intake.
"Over the past year or so, lower population growth may help explain why the unemployment rate has stabilised despite below average growth in GDP (gross domestic product)," the RBA said.
While slower population growth has kept a lid on the unemployment rate, it can also slow spending growth and the economy's ability to supply goods and services, it said.
JP Morgan economist Ben Jarman expects the cash rate will stay unchanged for an extended period and the RBA's forecasts confirm that view.
"The unemployment rate is probably the key barometer here. If it stays steady in the low sixes, the cash rate probably will too," he said.
The RBA moved the cash rate to its record low of two per cent in May.
THE RBA'S VIEW ON THE ECONOMY
* Growth in year to Dec 2015 of 2.5pct, unchanged from May's forecast
* Growth in year to June 2016 of 2-3 pct, down from 2.5-3.5 pct
* Growth in year to June 2017 of 3-4 pct, up from 2.75-4.25 pct
* Inflation in year to Dec 2015 of 2.5 pct, unchanged
* Inflation in year to Dec 2016 of 2.5-3.5pct, up from 2-3 pct
* Unemployment to peak below 6.5 pct
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