Australia's central bank left official interest rates on hold Tuesday, saying downside risks to the global economy appeared to have abated, particularly in China, Europe and the United States.
Reserve Bank of Australia governor Glenn Stevens kept rates at their record low of 3.0 percent, a level last seen in the global financial crisis, offering an upbeat assessment of global and domestic prospects.
"Global growth is forecast to be a little below average for a time, but the downside risks appear to have abated, for the moment at least," Stevens said following the bank's first meeting on monetary policy for 2013.
"The United States has so far avoided a severe fiscal contraction and financial strains in Europe have lessened considerably over recent months. Growth in China has stabilised at a fairly robust pace."
Stevens said financial market sentiment had brightened, though he warned that "the task of putting private and public finances on sustainable paths in several major countries is far from complete".
"Accordingly, financial markets remain vulnerable to setbacks in these areas," he said.
The rate pause had been widely expected by analysts, and the Australian dollar dipped slightly to US$1.0429 from US$1.0444 immediately before the decision.
Stevens said there had been a "significant easing" in monetary policy during the course of 2012, with interest rates slashed by 125 basis points through the year, and the "expected effects" were beginning to take effect.
"The demand for some categories of consumer durables has picked up, housing prices have moved higher, there are early indications of a pick-up in dwelling construction and savers are starting to shift portfolios towards assets offering higher expected returns," he said.
However, the Australian dollar remained inflated despite falls in commodity prices and exports, and cautious householders and firms were still debt-averse, with inflation easing to a muted 0.5 percent in the December quarter, he added.
The peak in mining investment was also approaching, and investment outside the key resources sector remained "relatively subdued" with implications for growth, which was currently tracking at 3.1 percent and slowing.
"The board's view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate," said Stevens.
"The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand."
Analysts said Stevens' remarks suggested rates were likely to stay on hold through 2013, with the full stimulatory effect of earlier cuts yet to be realised.
"I think they have hinted at a mild easing bias but we think the easing cycle is done," said HSBC Australia economist Paul Bloxham.
"The global economy has stabilised, the China story has picked up and policy settings in Australia are already conducive to supporting growth."