Australia's central bank said the direction of the country's currency movements will be important in setting policy and signalled that further interest rate cuts remain a possibility, minutes of its August 6 meeting, at which it reduced its benchmark rate to a record-low 2.5 per cent, showed.
"Regarding the communication of this decision, members agreed that the bank should neither close off the possibility of reducing rates further nor signal an imminent intention to reduce rates further," the Reserve Bank of Australia said in the minutes, released yesterday. "The course of the exchange rate would be important [in setting policy]."
The Australian dollar has dropped 12 per cent in the past three months, the worst performer among a group of 10 currencies, and governor Glenn Stevens and his board have cut rates by 2.25 percentage points since late 2011 as growth slows and unemployment rises.
The RBA aims to rebalance the economy from mining regions in the north and west, where an investment boom is waning, towards industries including residential construction in the south and east.
"With growth expected to remain below trend for longer and inflation to remain within the target even with the effects of a lower exchange rate, members concluded that a lower level of the cash rate would better contribute to achieving sustainable growth in demand consistent with the inflation target," it said.
The RBA reduced its growth forecast this month to 2.25 per cent for the year, compared with 2.5 per cent forecast three months earlier. The unemployment rate held at an almost four-year high of 5.7 per cent last month as fewer people sought work, government data showed.