The central bank says it will be guided rather than bound to its estimates of a long-term "neutral" cash rate of 3.5 per cent.
Assistant governor Luci Ellis has provided guidance on how the Reserve Bank of Australia views the challenge of identifying the neutral cash rate.
Put simply, this is the level where interest rates have neither a stimulatory nor contractionary effect on the economy.
It's important because it can indicate where rates may settle in the long run.
Her speech at the Citibank Conference in Sydney on Wednesday unveiled its latest neutral rate estimates calculated using nine different models.
The bank's expectations for the "real" neutral rate, which is adjusted for inflation, ranges between -0.5 to 2 per cent.
But borrowers need to incorporate expected inflation on top of that, meaning the "nominal neutral cash rate" could be at least 2.5 per cent, with the average estimate of the RBA's models sitting at 3.5 per cent.
Dr Ellis stressed there were many variables involved and the central bank was not taking a prescriptive return path to "more normal" levels.
"Don't think of this as a mechanistic approach of 'we have to get back to neutral or above neutral'," she said.
"The neutral rate is an important guide rail for thinking about the effect policy might be having. It is not necessarily a prescription for what policy should do."
The RBA has been aggressively lifting interest rates from record lows in a bid to tame inflation, although it shifted to a gentler pace of tightening in October.
The cash rate is sitting at 2.6 per cent.
AMP Capital economists see the sweet spot around two to 2.5 per cent due to Australia's high household debt to income levels, meaning households are particularly sensitive to higher interest rates.
"The Australian neutral rate has been on a downtrend for the past 10 to 15 years, alongside potential GDP growth, interest rates and bond yields," AMP Capital's Diana Mousina said.
AMP economists expect the slightly-above-neutral rate to start putting downward pressure on economic growth and inflation.
NAB economists have tweaked their monetary policy prediction, although they still expect a peak of 3.1 per cent.
The economists expect 25 basis-point lifts in November and December.
The bank's economists have also downgraded their predictions for growth and expect a 1.3 per cent quarter-on-quarter lift and a 0.9 per cent lift in overall GDP growth.
"While we expect growth to track at below-trend rates in 2023 and 2024, we do not see a major downturn in the economy," the economists wrote.
The International Monetary Fund has revised its global growth forecasts for 2023 downwards by 0.3 percentage points to 2.6 per cent.
Despite the challenges, Treasurer Jim Chalmers insists Australia is in a strong position.
He's in Washington meeting the head of the US central bank, IMF and World Bank bosses, and finance ministers from other nations.
The latest Seek report shows another drop in job ad numbers, with volumes declining by 5.2 per cent in September.
However, the job market is still strong by historical standards, up 15.5 per cent over the year.
