Reserve Bank governor Philip Lowe has effectively ruled out the possibility of cutting its official interest rates below zero and urged business to take advantage of the already historically low borrowing costs.

Key points: RBA governor Philip Lowe says negative interest rates were having a "pernicious" effect on the financial system and pensions in Europe

RBA governor Philip Lowe says negative interest rates were having a "pernicious" effect on the financial system and pensions in Europe Dr Lowe says previously unviable big investments were now making economic sense at current historically low interest rates

Dr Lowe says previously unviable big investments were now making economic sense at current historically low interest rates The markets odds on another rate cut next week have eased significantly

"It is extraordinarily unlikely that we will see negative interest rates in Australia," Dr Lowe said in a prepared speech in Canberra this evening.

In a question and answer session later, Dr Lowe expanded on his distaste for negative rates, arguing they were having a "pernicious" effect on the functioning of the financial system and the pension system in Europe.

Dr Lowe pointed out the Swiss government bond yields were below zero across the board and were largely negative in Germany, the Netherlands, France and Japan.

However, he said interest rates in Australia will still have to be kept low for an extended period to reach the goals of full employment and inflation back within the RBA's 2-to-3 per cent target.

The RBA has signalled the unemployment rate, currently sitting at 5.2 per cent, needs to fall to 4.5 per cent or lower, while this week's inflation data is expected to confirm inflation has again undershot the target band, much as it has for the past five years.

Uneconomic investments could now make sense

Dr Lowe argued business, and to some extent government, had the opportunity to use the low borrowing costs to do things which would otherwise be too expensive at more "normal" levels.

"At low interest rates, many investments that didn't make sense at higher interest rates should now make sense," he said.

"This is especially so for investments with long-term payoffs because future returns no longer need to be discounted as highly.

"This means that low interest rates give us the opportunity to lengthen our horizons and think about projects with really long-term payoffs.

"As is the case internationally, the focus needs to be on an improvement in the investment environment, so that investors are prepared to … use low funding costs to build new productive assets.

"Not only would this help assist with a return to more normal interest rates, but it would be good for our collective welfare too," he added.

Rate cut betting eased

The market reined back its expectations on further rates from the RBA in recent weeks.

From a 50/50 bet at the start of the month that the cash rate would be cut again at the RBA board's Cup Day meeting, the chance of a cut next week is now priced in at just 10 per cent.

As well, the 30-day cash rate futures curve no longer has a full 25 basis point cut priced in over the foreseeable future — a change in sentiment that will ease pressure on the RBA to move again quickly.

NAB economist Kaixin Owyong said she still expects a further 25 basis point rate cut to 0.5 per cent in December.

She added there was "a risk of a further cut and unconventional policy in next year if meaningful additional fiscal stimulus does not eventuate".

"Today's speech suggests the RBA still has a clear easing bias as it is prepared to lower rates further to achieve full employment and the inflation target," Ms Owyong said.