The RBA has substantially cut its growth forecast as the Australian dollar remains high and mining investment continues to drop off.

The forecast “reflects the substantial fall in mining investment, planned fiscal restraint and the still high level of the Australian dollar,” the RBA stated today in its quarterly monetary policy statement. With interest rates remaining untouched for the past three months, with the RBA board determining “it was appropriate to hold the cash rate steady, but not to close off the possibility of reducing it further, should that be needed to support economic activity,”.

The bank stated that "A range of information points to some delay in the expansion of coal mining, and the viability of some of this expansion being more tentative than previously considered,"..."Investment in iron ore and liquefied natural gas (LNG) extraction has also been revised down a little."

In its November monetary policy statement, the RBA has revised its GDP forecast for the year to December 2014 to between 2-3%, down from the 2.5 per cent to 3.5 per cent forecast in its August statement.

As hoped, the lowering of interest rates to record levels has seen the housing industry begin to recover as both the construction of new dwellings, and the increased turnover in established properties helps boost consumption. The RBA has not ruled out further rate cuts to continue to stimulate the housing market and increase non mining investment.