Glenn Stevens expects unemployment to keep rising in the short term.

Glenn Stevens expects unemployment to keep rising in the short term. Photo: Alex Ellinghausen

Reserve Bank governor Glenn Stevens passed over the opportunity to talk down the Australian dollar even as the currency soared to a three-month high, stoking suggestions the central bank could be comfortable with its current levels.

The central bank boss was cautiously optimistic about his outlook for the Australian economy in his testimony to the Senate economics committee, saying while there was scope to lower interest rates if it was needed, ''I do not think we do need to at this point in time''.

Mr Stevens said ''very accommodative'' monetary policy was supporting credit growth and construction in the housing sector. The Reserve Bank has slashed the cash rate by 225 basis points since November 2011 to support the non-mining sectors of the economy as the resources investment boom fades.

''We have signalled the likelihood, if the economy evolves more or less as expected, of a period of stability in the cash rate,'' he said. ''As well as the low level of interest rates generally, a sense of stability should be of some help for businesses and households as they form their plans.''

While the committee members gave Mr Stevens several opportunities to call for a lower exchange rate, which he had done on numerous occasions late last year, the RBA chief sidestepped the questions.

''I have been prepared to say that at various times I thought its long-run equilibrium was probably somewhat lower than where it was trading at the time,'' Mr Stevens said in response to a question on ''what is jawboning?'' He also declined to comment on whether an Australian dollar trading below US90¢ was in line with the economy's fundamentals, saying only that he stood by his previous remarks. In opening comments, he said the currency was ''still high by historical standards'', repeating the phrase the RBA used in its March board meeting statement this week.

However, Mr Stevens had described the currency as being ''still uncomfortably high'' in early December when it was trading about US91¢ - the same levels it was trading at on Friday. The dollar jumped to a three-month high early on Friday after stronger than expected economic data over the past days, including improved retail sales and a rise in the trade surplus, boosted confidence in the economy. It was buying US90.90¢ in late trade.

Mr Stevens' quip that he had ''nothing new to say'' on the currency's levels on Friday ''suggests that the RBA may be more accepting of the currency at its current level that we first thought'', Barclays' chief economist Kieran Davies said.

Analysts said it could also be an acknowledgement the ''jawboning'' approach could have less of an impact on financial markets amid a shift towards a neutral monetary policy stance, or that the central bank was concerned about the impact a weaker exchange rate could have on pushing up inflation.

Mr Stevens repeated his recent comments on the surprise rise in fourth-quarter inflation, saying there was a ''slight puzzle with the recent data'' and more figures were needed to explain the unexpected jump in consumer prices.

He warned there was uncertainty about the handover from mining to non-mining sectors of the economy despite signs that a shift was already taking place.

''Will the additional demand likely to be generated outside mining as a result of these trends be just the right amount to offset the large decline in mining investment spending, so keeping the economy near full employment?'' he said. ''The honest truth is no one can answer that question with great confidence.''

Mr Stevens and RBA assistant governor Christopher Kent, who also attended the hearing, said they expected the unemployment rate to rise until late this year or early 2015.