New data suggests China may have turned the corner in its self-imposed economic slowdown, as Australia's central bank boss appeared relaxed about developments in the nation's top trading partner.
Reserve Bank of Australia (RBA) governor Glenn Stevens gave no fresh clues about the outlook for interest rates in a lunchtime speech on Tuesday, other than saying settings are "about right".
Some economists still believe there could be another rate cut in August, with key inflation data due on Wednesday expected to be extremely benign.
Delivering his annual Anika Foundation speech, Mr Stevens stuck close to his recent theme of the economy being viewed as a "glass half full", and showing a remarkably good performance against a turbulent international backdrop.
"Many foreign visitors to Australia comment on this relative success ... notwithstanding our domestic tendency towards the glass half empty view," Mr Stevens said.
Treasurer Wayne Swan said the governor has delivered another "body blow" to the doomsayers and scaremongers determined to talk our economy down.
"With renewed volatility in the global economy particularly from Europe, the contrast with Australia's rock-solid economic fundamentals could not be more stark," Mr Swan said in a statement.
TD Securities head of Asia-Pacific research Annette Beacher said Mr Stevens appeared "relaxed and comfortable" about the outlook.
"There is yet again no sense of panic from the RBA, sending the clear message that the governor is presiding over an economy that is not as vulnerable to the next economic shock as some commentators would have you believe," Ms Beacher said.
Mr Stevens said while there had been a significant moderation in China's economic growth, it was an intended slowing rather than the sudden slump that was seen in late 2008.
He said recent data out of China were consistent with annual growth of seven to eight per cent.
This was down from the 10 per cent or more seen in the past five to seven years.
"But not even China can grow that fast indefinitely, and there were clearly problems building from that earlier breakneck pace of growth," Mr Stevens said.
He said even if there was a serious slump in China, the Australian dollar would probably fall, which would provide an expansionary impetus to the Australian economy, but more importantly, the Chinese authorities would respond with stimulus measures.
New data on Tuesday signalled an improvement in the Chinese economy, with HSBC's "flash" China manufacturing purchasing managers' index rising to a five-month high in July and its output index at a nine-month high.
The "flash" report is published a week before final manufacturing figures.
Mr Stevens said even a serious deterioration in international economic conditions would still see Australia with scope to use macroeconomic policy, if needed, "as long as inflation did not become a concern, which would be unlikely in the scenario in question".
Data due on Wednesday is expected to show that inflation is not a current concern either, with both the annual consumer price index and underlying measures expected to be below the RBA's 2-3 per cent target band.