* RBA chief says easing on table but highlights dangers
* Onus on lower A$ to provide stimulus, adjustment underway
* Core inflation marks five years within target range
By Wayne Cole
SYDNEY, July 22 (Reuters) - Australia's central bank sees scope for yet lower interest rates as inflation stays in the sweet spot for stimulus, though the bar for action is high given concerns it could lure households into taking on too much debt.
Offering a guardedly optimistic outlook on the economy, Reserve Bank of Australia (RBA) Governor Glenn Stevens said restrained inflation had already allowed rates to be cut to all-time lows and a further easing remained "on the table."
Yet he was quick to warn that such a move might encourage a borrowing binge that would end badly for all concerned.
"In meeting the challenge of securing growth in the near term, the stability of future economic performance can't be dismissed as a consideration," Stevens told a charity event. "A balance has to be found."
Investors took his reticence as a cue to scale back wagers 0#YIB: on an easing anytime soon. Rates are already down at 2.0 percent having been cut twice this year as the economy struggled with sliding prices for key resource exports and a related downturn in mining investment.
While the easing has fuelled a much-needed boom in home building, it also triggered a rush of investment demand for property and a rapid rise in Sydney house prices.
Analysts suspect the RBA would very much prefer if further stimulus came from a lower Australian dollar, and is getting its wish as the currency sank to six-year lows this week.
It has now fallen 21 percent against the U.S. dollar since July last year, a decline Stevens said was having the desired "expansionary effect" on trade and services such as tourism.
NOT TOO HIGH, NOR TOO LOW
Stevens' comments came as government data showed inflation remained benign last quarter despite a spike in petrol costs.
The Australian Bureau of Statistics reported the consumer price index (CPI) rose 0.7 percent in the second quarter, lifting annual inflation a touch to 1.5 percent.
Crucially, the annual pace of core inflation at around 2.3 percent stayed comfortably in the lower half of the RBA's target band of 2 to 3 percent.
Inflation has now been within the target range for no less than five years - a goldilocks scenario that was low enough to allow interest rates to be slashed but high enough to dodge the dangers of deflation.
"It's been a very good outcome, because you really don't want inflation going too low these days," said David de Garis, a senior economist at National Australia Bank.
"It means the RBA has time to judge the impact of past easing, without having an urgent need to do any more."
This is largely due to costs for goods and services that are not open to the rigours of international competition, such as healthcare and education.
Inflation for these non-tradable items ran at 2.6 percent in the year to June, while tradable prices fell 0.3 percent.
Once, stubbornly high non-tradable costs were considered a major drawback, but in a world where deflation is the danger they are proving unexpectedly helpful.