Australia's central bank has left monetary policy on hold for the seventh straight month at the record low 2 percent on improving local economic conditions.

Reserve Bank of Australia governor Glenn Stevens said that while the local economy is suffering from lower priced commodities, falling terms of trade and low capital investment, the economy is slowly transitioning to non-mining-led growth.

"While Gross Domestic Product growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year," Stevens said in a statement after the RBA's monthly board meeting on Tuesday.

"The Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate."

IG market analyst Angus Nicholson said a lot of the recent data suggests the local economy is in a far better shape than many had predicted.

Falls in resources and energy over the past 18 months mean they no longer have the same bearing on the stock market, Nicholson said, though interestingly also on Australian dollar and economy.

"They have both been more resilient to the further swoons in the iron ore price seen over the past month or so than many would have expected," Nicholson said.

The outlook for Australia's inflation however gives the board scope for a further easing of policy "should that be appropriate to lend support to demand," Stevens said.