Some positive signs in the global and Australian economies drove the decision to keep interest rates on hold, the Reserve Bank says.
The minutes of the most recent RBA board meeting, which led to the cash rate being unchanged at 0.75 per cent, showed members were upbeat about the global economy.
"The easing in trade tensions between the United States and China, and ongoing stimulus delivered by central banks, had supported a modest improvement in the growth outlook for a number of economies," the minutes said.
While the coronavirus was a new source of uncertainty, it was too early to tell what sort of impact it would have on the Chinese and global economies
"It was noted that previous outbreaks of new viruses had had significant but short-lived negative effects on economic growth in the economies at the centre of the outbreak."
"Some commodity prices, notably for industrial metals, iron ore and oil, had fallen on concerns that the coronavirus outbreak would disrupt production in China and reduce Chinese commodity demand in the near term. By contrast, rural prices had been little changed."
Following modest growth in the September quarter, the domestic economy is expected to be "weaker in the near term than had been forecast three months earlier" on the back of the bushfires and coronavirus outbreak.
"However, GDP growth was still expected to pick up over the forecast period, supported by accommodative monetary policy, a pick-up in mining investment, and recoveries in dwelling investment and consumption."
The bushfire recovery is expected to add to growth in the second half of 2020.
The central forecast for growth remained unchanged since November, at 2.75 per cent over 2020 and around three per cent over 2021.
Looking ahead, the RBA sees growth in consumption increasing gradually, sustained by moderate growth in household disposable income and the recovery in the housing market.
Growth in housing prices has picked up in most capital cities and parts of regional Australia over recent months, with prices increasing very strongly in Sydney and Melbourne.
Mining investment is considered to be going through a "trough" with non-mining investment also expected to be subdued in the near term, followed by a modest increase.
The unemployment rate was expected to remain in the five to 5.25 per cent range for some time before declining to around 4.75 per cent in 2021, as GDP and employment growth picks up.
Wages growth is expected to be largely unchanged over the following couple of years "because mild upward pressure on growth in the wage price index would likely be offset by downward pressure from the increase in the superannuation guarantee from mid-2021", the RBA said.
"Wages growth could pick up faster than expected if labour market conditions tightened by more than expected."
In a positive sign for home buyers, the RBA said around 60 basis points of the 75 basis point cut in the cash rate since mid-2019 had been passed through to standard variable mortgage rates.
Greater competition between lenders had delivered an average rate decline of almost 70 basis points.
"If this were to continue, by around mid-2020 the average rate paid on outstanding variable-rate mortgages would have declined by around 75 basis points since May 2019."
Going forward, the board said it would "continue to monitor developments carefully, including in the labour market, and remained prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time".