Low interest rates and a falling Australian dollar are key to the economy getting past the mining boom and surviving China's slowdown, the Reserve Bank says.
Governor Glenn Stevens admits it has been a rocky few months for the global economy, with financial markets in turmoil and Australia's largest trading partner, China, showing signs of losing momentum.
Those concerns have contributed to the US Federal Reserve delaying its first interest rate hike in nine years, and Mr Stevens says global economic growth is at risk of slowing.
But the Australian economy should come through in good shape, as it did during the global financial crisis, the governor said during his biannual appearance before a parliamentary committee.
Unemployment will fall if the non-mining economy continues to pick up, and the Australian dollar's slide to around 71 US cents is helping to achieve that, Mr Stevens said.
"There is still a pretty good chance that we will come out of this episode fairly well, and much better than we came out of previous episodes of this type," he said.
Granted his wish of a lower Aussie dollar, Mr Stevens now wants a similar move in the unemployment rate, which he said is too high at 6.2 per cent.
"We ought to be looking to get back into the fives over time, and given enough time I think we will, unless we are hit by another bad shock from somewhere," Mr Stevens said.
There's also room to cut the cash rate in the event of emergency, though the RBA is "pretty content" with the rate at a record low of 2.0 per cent.
The key is confidence, which the central bank boss says is not as low as many think, but also remains a bit of a puzzle.
"It is one of the missing elements, and it isn't something you can turn on and it's not something that's easy to explain," he said.
Economists generally saw Mr Stevens' responses during the three-hour grilling as an optimistic stance in the face of rising global risks.
Interest rates are expected to remain on hold well into 2016.
"Some may be a bit surprised at governor Stevens' upbeat tone but he always has been a glass half full governor," CommSec chief economist Craig James said.
"It is clear that interest rate settings are solidly on hold, especially given that the governor is more comfortable with the level of the Aussie dollar."
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