Australia's central bank cuts 2015 growth forecast

The Reserve Bank of Australia on Friday cut its 2015 growth forecasts for the local economy from three percent to 2.75 percent.

The RBA statement follows the central bank cutting 25 basis points off the cash rate to 2.25 percent this week, revealing a more cautious economic outlook.

The central bank also said the unemployment rate is also expected to rise further than previously expected to around 6.5 percent, however expects a lower currency and falling interest rates will boost demand and economic growth into 2016 and 2017.

"Growth is now expected to remain below trend over the course of this year and then to pick up to an above-trend pace in the latter part of the forecast period, in response to rapid growth in LNG exports and the lower exchange rate and interest rates," the RBA said in a statement.

The RBA said it expects slightly lower inflation in 2015 between two to three percent reflecting "a fall in oil prices and (the) slightly weaker near-term outlook for product and labour markets which more than offset the upward price pressures from further exchange rate depreciation."

Although the slower growth predicted for China will affect the Australian economy, falling oil prices and a lower value of the dollar would help alleviate this situation.

"This raises the possibility of further depreciation, which by itself represents an upside risks to the forecasts of growth and inflation," the RBA said.

The reserve bank said it would be watching the housing market " carefully" so a property bubble would not develop.

"Given the large increases in housing prices in some regions and ongoing strength in lending to investors in housing assets, housing market developments will need to be watched carefully," the RBA said.

"The bank is working with other regulators to assess and contain economic risks that may arise from the housing market." Endi