The Reserve Bank of Australia (RBA) on Tuesday left interest rates unchanged at a record low of 2.5 percent, in line with market expectations.
In a statement, the central bank said the Australian dollar remains historically high. The RBA added that it sees a period of stability for interest rates and an improvement in the labor market, although it would be sometime yet before unemployment declines consistently.
The central bank's decision comes a week before the coalition government is due to hand down its first budget since winning the elections in September last year.
The government has already warned of a tough budget, which will likely include temporary income tax hikes, raising the retirement age and cuts to spending on social services in a bid to trim the country's deficit.