Reserve Bank of Australia deputy governor Philip Lowe says a higher cost of credit in the economy meant official interest rates have to be around 1.5 percentage points lower than otherwise to compensate.
At an economics conference, Mr Lowe said stricter banking regulation and a general distrust of banks globally have lifted the cost of borrowing.
The RBA has cut interest rates to 3.5% to support the economy in the face of slowing global growth.
