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No one using low rates to invest: RBA

AAP logoAAP 22/09/2016

New Reserve Bank governor Philip Lowe believes it is unlikely Australia will run out of "monetary room" and force it to undertake "incredibly unusual things" like other countries where they have zero interest rates.

However, he says "some entity" or government should use low interest rates to invest, using their balance sheets to facilitate infrastructure spending.

"The reason why ... monetary policy is not working globally, no one wants to use low interest rates to increase their spending," Dr Lowe told a parliamentary committee hearing in Sydney on Thursday.

Dr Lowe noted financial markets are factoring in a 50 per cent probability of a further interest cut in Australia.

"That's possible, it going to depend on a whole range of factors," Dr Lowe said.

These include what happens overseas, the next Australian inflation data, and how the labour market and housing markets are performing.

"Certainly there are scenarios where rates would fall again, there are scenarios where they wouldn't need to fall again," he said.

The Reserve Bank has already cut the cash rate twice this year to a record low 1.5 per cent.

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