The Reserve Bank views negative interest rates as being an “extraordinary unlikely” course of action in Australia, even though it is predicting the unemployment rate rising to 10 per cent by the end of the year.

In its quarterly statement on monetary policy released on Friday, the central bank says negative interest rates would be a stimulatory benefit by putting downward pressure on the Australian dollar.

“But negative rates come with costs too. They can cause stresses in the financial system that are harmful to the supply of credit and they can encourage people to save rather than spend,” it says.