The central bank's decision to lower its forecasts for inflation and growth shows the nation's economy is rock solid despite headwinds from Europe, Treasurer Wayne Swan says.
The Reserve Bank of Australia released a statement on monetary policy this morning, in which it predicted underlying inflation would be about 2.25 per cent in the year to the end of June, 0.25 basis points lower than it forecast three months ago.
It has also lowered its forecast for GDP growth in the year to June to 3.5 per cent from 4.0 per cent.
The RBA said that uncertainty about Europe's debt crisis had weighed on domestic household and business confidence.
While ongoing strong growth was expected in the mining sector, other parts of the economy, especially those affected by the high value of the Australian dollar, would continue to struggle, the RBA said.
But Mr Swan said the statement confirmed that despite the global uncertainty, "our economic fundamentals are absolutely rock solid" and "we continue to outperform all economies in the developed world".
"We know there are strong global headwinds in the global economy, and that does produce pressures in our economy, particularly the pressures which flow through to our economy from a stronger dollar," Mr Swan told reporters in Sydney.
"Those pressures do unsettle consumers, and it does make life pretty tough for a number of sectors in our economy, particularly manufacturing and also tourism.
"The message from the RBA today is a reminder to all of the doomsayers and naysayers that we do have a strong economy, we have low unemployment, we have bright economic prospects, but we do understand that in this environment, particularly with what is going on globally, there are also pressures in our economy."
