The Reserve Bank of Australia has left the door open for another interest rate cut despite leaving its benchmark interest rate steady.
The central bank's board met on Tuesday morning for its regular monthly monetary policy meeting.
The decision to leave the interbank overnight cash rate steady was well anticipated, having been flagged at the time of the previous meeting.
The cash rate has been at a 49-year low of 3% since being cut from 3.25% in April.
That move was the last in a series of cuts beginning in September last year that brought the cash rate down from the 12-year high of 7.25% reached six months earlier.
In a statement released after the meeting, RBA governor Glenn Stevens expressed qualified optimism for the global economy as well as for Australia.
While downside risks had abated globally and China's economy had strengthened, he said "credit conditions remain tight and the effects of economic weakness on asset quality present a challenge".
For Australia, economic conditions had not turned out as weak as expected a few months ago, while a pick-up in housing credit pointed to increased activity later in the year.
However, businesses have been borrowing less as firms put off investment and reduce leverage.
