SYDNEY (Reuters) - The Reserve Bank of Australia (RBA)is prepared to ease monetary policy again if needed to help boost job growth and stoke inflation, governor Philip Lowe said on Tuesday hours after cutting the cash rate to a historic low of 1%.
Lowe said there was still a "fair degree" of spare capacity in the economy and that it was both possible and desirable to reduce labour market slack.
"We will be closely monitoring how things evolve over coming months," he said in a speech in Darwin.
"Given the circumstances, the Board is prepared to adjust interest rates again if needed to get us closer to full employment and achieve the inflation target in a way that supports the collective welfare of all Australians."
Lowe, once again, took the opportunity to nudge Australia's newly re-elected government to boost fiscal spending after cutting the cash rate for the second time in as many months - the first back-to-back easing since 2012.
"Monetary policy does have a significant role to play... But, we should not rely on monetary policy alone," he said.
Lowe urged the ruling centre-right coalition to boost infrastructure spending, highlighting the government can now borrow at considerably low rates. The 10-year rate of around 1.3%, for instance, is the lowest since 1901.
"It is appropriate to be thinking about further investments in (infrastructure), especially with interest rates at a record low, the economy having spare capacity and some of our existing infrastructure struggling to cope with ongoing population growth," he said.
The RBA chief painted a downbeat picture of the world economy, highlighting risks stemming from uncertainty around trade and technology disputes between the United States and China.
That has made businesses around the world nervous about investing, in turn hurting international trade and corporate investments, Lowe said.
"If this continues for too much longer, the effects on economic growth are likely to be significant. For this reason, the risks to the global economy remain tilted to the downside."
(Reporting by Swati Pandey)
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