Australia's central bank is prepared to cut interest rates further, but they are unlikely to drop to near zero as they have in some other countries, the governor said on Friday.
"We'll be prepared to go low enough to what is needed," Reserve Bank of Australia governor Glenn Stevens told a parliamentary economics committee hearing.
"It is not my present expectation we're going to find ourselves at nothing."
The bank has slashed a total of 400 basis points off the official rate since September, taking it to a 45-year-low of 3.25 per cent this month, on concerns over the impact of slowing world growth.
In the United States, the federal funds target rate is zero to 0.25 per cent while Japan's key lending rate is 0.1 per cent.
Stevens said Australian market expectations were "toying" with a bottom in the cash rate of 2.0 per cent or 2.25 per cent and he had "no particular desire to encourage or disabuse them" of those expectations.
Australia was better placed than many other countries to ride out the global downturn, with its major financial institutions still strong, he said.
"So there are reasonable grounds at this stage to think that the Australian economy will come through this very difficult episode – certainly not unscathed, but well placed to benefit from a renewed expansion," he said.
Stevens noted that major trading partner China was suffering problems of its own, but said the Asian giant was still full of potential for Australia.
China's booming economy and demand for raw materials such as coal and iron ore had driven Australia's own growth for years and the downturn has had a major effect on the local economy.
"It's still the case that the emergence of China as a large, industrialised economy has years and years to run," Stevens said. "So it will be a volatile ride on occasion as it is today.
"But I can't believe that emergence is finished and it seems to be that Australia has plenty of potential to benefit from that over the long run as we did over the last couple of years."
Stevens said 2009 would be a difficult year but "the long-run prospects for Australia have not deteriorated by as much as we may all be feeling just now".
Two government economic stimulus packages totalling more than 52 billion dollars (34 billion US dollars), aimed at increasing consumer spending and protecting jobs, should boost growth, he said.
"We'll be prepared to go low enough to what is needed," Reserve Bank of Australia governor Glenn Stevens told a parliamentary economics committee hearing.
"It is not my present expectation we're going to find ourselves at nothing."
The bank has slashed a total of 400 basis points off the official rate since September, taking it to a 45-year-low of 3.25 per cent this month, on concerns over the impact of slowing world growth.
In the United States, the federal funds target rate is zero to 0.25 per cent while Japan's key lending rate is 0.1 per cent.
Stevens said Australian market expectations were "toying" with a bottom in the cash rate of 2.0 per cent or 2.25 per cent and he had "no particular desire to encourage or disabuse them" of those expectations.
Australia was better placed than many other countries to ride out the global downturn, with its major financial institutions still strong, he said.
"So there are reasonable grounds at this stage to think that the Australian economy will come through this very difficult episode – certainly not unscathed, but well placed to benefit from a renewed expansion," he said.
Stevens noted that major trading partner China was suffering problems of its own, but said the Asian giant was still full of potential for Australia.
China's booming economy and demand for raw materials such as coal and iron ore had driven Australia's own growth for years and the downturn has had a major effect on the local economy.
"It's still the case that the emergence of China as a large, industrialised economy has years and years to run," Stevens said. "So it will be a volatile ride on occasion as it is today.
"But I can't believe that emergence is finished and it seems to be that Australia has plenty of potential to benefit from that over the long run as we did over the last couple of years."
Stevens said 2009 would be a difficult year but "the long-run prospects for Australia have not deteriorated by as much as we may all be feeling just now".
Two government economic stimulus packages totalling more than 52 billion dollars (34 billion US dollars), aimed at increasing consumer spending and protecting jobs, should boost growth, he said.
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