The central bank chief expects the peak in Australia's resources investment boom to occur in the next year or two when export shipments will pick up.
Reserve Bank of Australia (RBA) Glenn Stevens said the economy appears to have been recording reasonable overall growth, relatively low unemployment, and low inflation.
"Looking ahead, the peak of the resource investment boom as share of GDP - the highest such peak in at least a century - will occur within the next year or two," he said in his regular six-monthly appearance in front of the House of Representatives economic committee in Canberra on Friday.
"After that the rate of resource investment is likely to decline, while the export shipments of the resources themselves will pick up."
He said by then the RBA might expect some other sectors that have been weak of late, like residential and non-residential construction, might be starting to pick up.
"Overall, growth is forecast still to be close to trend, albeit with a different composition from that seen in the past year or two, and inflation consistent with the target," he said.
Mr Stevens said while this is the central bank's central forecast, there are "risks and uncertainties" to the outlook.
"At a time of significant global uncertainty, and of important structural changes in the Australian economy, the degree of confidence we can attach to particular forecasts is, unavoidably, reduced," Mr Stevens said in his opening statement.
"We remain prepared to respond to significant deviations from the central outlook, to the extent that it is prudent and possible to do so, within the framework that aims to foster sustainable growth and inflation at 2-3 per cent over time."
He said the rise in the Australian dollar that occurred over 2009 and 2010 has had a significant impact on prices for traded goods and services, but this dampening effect looks like it has now started to wane.
"The more moderate growth of domestic costs and prices that we have seen will need to continue, in order for inflation to remain consistent with the monetary policy objective," he said.
"At present our forecast remains that this will be the case."
However, Mr Stevens said the exchange rate remains quite high, even with the decline in the terms of trade over the past year.
The central bank cut the official cash rate by 75 basis points in May and June, following on from two reductions in late 2011.
Mr Stevens said this has resulted in borrowing rates being a little below their medium-term averages.
"Since then, with growth close to trend and inflation consistent with the target, but the global outlook weaker than it was earlier in the year and confidence a bit on the subdued side, we have judged this to remain the appropriate stance," he said.
"It is too early to tell how much difference the sequence of decisions to lower interest rates late last year and in the middle of this year has made to the economy."
However, he said dwelling prices may have stopped their earlier gentle decline, and business credit has been growing at its fastest pace for three years.
Consumption spending has been stronger over the first half of the year, but this recent strength may in part be due to the effects of government compensation payments associated with the introduction of the carbon price.
Mr Stevens described the slowing in the global economy of being of the more "ordinary variety".
"That is not to make light of these developments, only to keep them in some sort of perspective," he said.
"The kind of growth envisaged for the world as a whole is close to its long-run average."
He said the Chinese economy looks like it has slowed to a pace of growth that is likely to be more sustainable, although this is below the pace seen for much of the recent past.
"The implications of this new pace of growth for the trajectory of demand for various commodities are still being worked through in the relevant markets," he said.
"Commodity prices have declined. Australia's terms of trade peaked about a year ago. However, they remain high in comparison with most of the past century."
He said developments in key commodity prices overall do not seem out of line with the progress of the global economy.
He said financial market sentiment has again recovered somewhat lately, but it could not be said that confidence is strong.
"Uncertainty is high and much of this stems unavoidably from the situation in Europe," he said.
"Realistically, it will be quite some time before the Europeans will be able to say these problems have been put behind them, even if things go well."