(RTTNews) - The Reserve Bank of Australia still has ammunition, in the form of lower interest rates, if needed to help the nation’s economy, said RBA Governor Glenn Stevens.

“We have scope to do more, if more is needed,” Steven said Friday in remarks to members of Parliament’s Standing Committee on Economics.

Stevens and the central bank have reduced Australia’s cash rate by 400 basis points since September to its current 45-year low of 3.25 percent.

The RBA Governor said the rate reductions, coupled with the government’s economic stimulus moves and lower exchange rate, should help economic demand increase through the course of the year.

He added that the RBA was prepared to make further cuts, if necessary. “If there is a need to use more interest rate stimulus, and if that’s prudent, then we can,” said Stevens. “I don’t want to try to steer expectations about that particularly today. It’s just that we have scope to do more if more is needed.”

Stevens predicted Australia’s economic downturn would not be a deep one, and said no moves by the central bank or the government could have overcome the negative influences coming from the global economic crisis.

“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,” Stevens said. “Things will be difficult over the next year.”

In its February Monetary Policy Statement, the RBA projected Australia’s full year expansion to be 0.5 percent in 2009 along with declining inflationary pressures.

“We are being affected by the global downturn and we cannot realistically expect other than weak conditions, at least in the first part of 2009,” Steven said. “This is a weak near-term outlook to be sure.”

The Australian dollar turned higher in reaction to the Stevens comments, hitting US$0.6484 just after the remarks from its pre-speech level of $0.6442 before falling back somewhat.

Turning his attention overseas, Stevens said continued economic growth in China is likely to help Australia weather the economic downturn. “China’s emergency, for example, has not finished. It has years to run and Australia will benefit from it,” Stevens said. “We should not lose sight of that or other positives.”

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Posted in Categories: Australia, Economy, Forex, Releases, USA.

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