The troubles facing the global economy are making it harder for the Reserve Bank to navigate a soft landing for the Australian economy.
RBA governor Philip Lowe said higher-than-expected inflation figures in the US and deteriorating economic conditions in Europe and China were making it hard to return inflation to the two to three per cent target and keep the economy on an "even keel".
"I think it is possible to achieve this but the path here is a narrow one and it's clouded in uncertainty," Dr Lowe told the House of Representatives economics committee on Friday.
Dr Lowe used his opening speech to address concerns about the RBA's response to pandemic-era challenges.
"In those dark days of the pandemic, the Reserve Bank board judged that the bigger policy mistake would have been to do too little rather than too much," he said.
"If the worst had occurred, Australians would have paid a heavy price."
Dr Lowe defended the bank's earlier commitment to low interest rates until 2024.
"I'm frequently reminded that many people interpreted our previous communication as a promise or as a commitment that interest rates would not increase until 2024 - this was despite our statements on interest rates always being conditional on the state of the economy," he said.
Future cash rate decisions would depend on inflation expectations and how general inflation psychology evolved in Australia, he said.
The RBA is facing a separate independent review that will scrutinise everything from its core objectives to its communication skills.
The review, introduced by Treasurer Jim Chalmers, has been welcomed by shadow treasurer Angus Taylor, although he warned against distracting the central bank from its core mandate of controlling inflation.
Since May, the RBA has lifted its cash rate target from 0.1 per cent to 2.35 per cent, which has added more than $600 a month to the average mortgage holder's monthly repayments.
