The Reserve Bank of Australia yesterday defied forecasts from economists and left interest rates on hold, declaring a pause to what had been one of the developed world's most aggressive unwindings of monetary stimulus.

The move followed the three interest rate rises announced since October and caused the Australian dollar to drop as much as 1.5 per cent. In a statement, Glenn Stevens, RBA governor, said the decision to hold fire on raising rates further had come in part because “information about the early impact” of the bank's previous moves was “still limited”.

But a reference in Mr Stevens' statement to Chinese authorities and the way they “are now seeking to reduce the degree of stimulus to their economy” pointed to what has arguably become Australia's most important economic relationship. Australia's ability to skirt recession and outperform all developed country peers owes much to its increasingly powerful trading relationship with China.