The falling Australian dollar may take expected interest rate cuts off the table next year, National Australia Bank chairman Michael Chaney says.
Three out of Australia's big four banks, including NAB, expect the Reserve Bank of Australia to cut the cash rate to two per cent in 2015 to help boost the economy amid a downturn in the mining sector and falling commodity prices.
But Mr Chaney told shareholders at NAB's annual general meeting the sliding Australian dollar may do the RBA's work for it, allowing it to keep the cash rate at its current record low of 2.5 per cent before hiking further down the track.
"All the wisdom suggests there may be cuts next year but our economists would be the first to say that may well not happen," he said.
"It may be that, with the way the Australian dollar is falling, the bank decides that's not going to be necessary."
The Australian dollar has slumped 14 US cents in the past five months to around 81 US cents, though RBA governor Glenn Stevens has said it should be closer to 75 US cents, given the slide in commodity prices.
While mortgage holders would cheer further cuts, Mr Chaney said the low interest rate environment was hurting savers.
"Generally when interest rates are cut there's celebrating around the place but for a lot of people it's a serious issue because they are relying on interest income," he said.
Despite the possible boost from the lower dollar, which will make many Australian businesses more competitive, NAB expects below average growth from the economy in 2015 due to the mining weakness.
Mr Chaney said Australia had "reasonable" long-term economic prospects, thanks to its relationship with China and the aim of G20 nations to boost global growth.
He also backed the federal government's financial systems inquiry but urged caution on proposals to lift capital reserves for banks.
"We need to make sure we don't jeopardise growth in the economy and obviously if capital levels were too high than funding would be an issue," he said.
"I'm sure there'll be a sensible balance on that."
Meanwhile, NAB chief executive Andrew Thorburn said the bank's efforts to exit its troubled UK business and focus on its core Australian and New Zealand businesses would provide the bank with opportunities to grow.
"We're in economies in which the medium term outlook is for very positive GDP growth, we're on the door step of Asia where the outlook, despite some bumpy paths no doubt, is extraordinarily positive," he said.
"If we nail this and focus and execute, which we intend to, we've got plenty of growth prospects."
NAB shares rose 38 cents to $31.73.
