Reserve Bank of Australia (RBA) governor Glenn Stevens has stoked expectations of an interest rate cut next week.

In speech to economists in Sydney, the nation’s top central banker dwelt on the changes to household behaviour – a shift toward less risky investment and higher savings – since the end of the housing price surge that preceded the mining boom.

Interest rate cuts are designed to reverse, at least partly, that tendency toward caution, to prompt faster economic growth by encouraging investment in “slightly more risky asset classes”, he said.

“There are clearly signs of policy working in this respect, though not, to date, by so much that we see a serious impediment to further easing, were that to be appropriate from an overall macroeconomic point of view,” he said.

Later in the speech, he reinforced the point for anyone thinking that the slightly faster-than-expected measures of underlying inflation reported last week might have pushed a rate cut onto the back burner.

“We have been saying recently that the inflation outlook may afford some scope to ease policy further if needed to support demand.

“The recent inflation data do not appear to have shifted that assessment,” he said.

One of the ways monetary policy boosts economic growth is to reduce support for the Australian dollar, giving local industries a competitive leg-up.

And it seems Mr Stevens would not be averse to further declines in the Australian dollar in response to the rate cuts already undertaken, and any still on the way.

A lower exchange rate would help sectors outside mining to pick up the slack as the resource investment booms tapers off, he said.

He referred to this process, sometimes referred to as “rebalancing”, as “demand rotation”.

“Given that, the recent decline in the exchange rate seems to make sense from a macroeconomic perspective.

“It would not be a major surprise if a further decline occurred over time, though of course events elsewhere in the world will also have a bearing on that particular price,” he said.

Interpreting the words of central bankers usually involves some reading between the lines, but in this speech the lines are fairly close together.

It seems to be a fairly clear case of an RBA governor talking up the chance of a rate cut when the central bank’s board meets next Tuesday, and talking down the Australian dollar.