Australia would be protected from a sharp downturn in China's economy by lower interest rates and a flexible exchange rate, RBA governor Glenn Stevens says.
"We can lower interest rates if there's a case to do that," he told a parliamentary committee on Friday when asked about policy measures to offset the effects of a possible slump in China.
"And if the Chinese economy were to experience the fabled hard landing that many people have talked about for years - and which so far hasn't happened - you would expect in that world the exchange rate's probably going to go down, probably quite a bit, and that will be one of the key mechanisms that helps the Australian economy cope."
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