Rates relief will be slow

THE economy will continue to slide for at least six months as rates fall only gradually -- painfully slow relief for struggling families.

Rates relief will be slow

THE economy will continue to slide for at least six months as rates fall only gradually -- painfully slow relief for struggling families.

Reserve Bank Governor Glenn Stevens painted a bleak picture of stretched household finances, rising unemployment and weak consumer demand in his House of Representatives economics committee address yesterday.

"We're going through difficult times at the moment,'' he said.

"But we've got to try to navigate through some pretty tricky areas and accept some slowing in our economy for a while. That's my message. I realise that's not necessarily a terribly popular message but that's what we're trying to achieve.''

Mr Stevens defended his rate rises earlier in the year and said the bank's decision to cut interest rates in September from 7.25 per cent to 7 per cent would not have been possible without those earlier rate rises.

Inflation remains uncomfortably high at 4.5 per cent but the bank has taken the approach that the economy needs help to avoid a "hard landing'' or recession.

Mr Stevens said there was no evidence to suggest there could be a recession but conceded it couldn't be ruled out completely.

Analysts still see one or two more cuts this year, totalling 1.0 to 1.5 per cent.

Mr Stevens also emphasised the banks were free to increase rates independently, saying there was no law against banks moving their rates independently of the Reserve Bank.