UPDATE 1-Australia cenbank says low rates to stay, economy picking up as expected

* RBA Stevens reiterates period of stability in the cash rate

* Notes dollar still high by historical standards

* Says policy playing part in supporting sustainable growth in demand

SYDNEY, March 7 (Reuters) - Australia's central bank chief said on Friday that record low interest rates were helping the economy transition away from mining-led growth as well as can be expected and plotted a steady trajectory for monetary policy.

Reserve Bank of Australia (RBA) Governor Glenn Stevens, at his twice yearly Parliamentary testimony, also noted that while the local dollar had fallen, it remained high by historical standards. But he made no fresh effort to talk down the currency.

"At the present time we judge monetary policy to be doing the things it can reasonably be expected to do in the circumstances we face," Stevens told the House of Representatives Standing Committee on Economics.

"We have signalled the likelihood, if the economy evolves more or less as expected, of a period of stability in the cash rate."

Sevens said low rates coupled with policy stability should help businesses and households plan ahead.

At its March policy review, the RBA left its cash rate at a record low 2.5 percent, where it has been since the last cut in August. In all, the RBA has slashed 225 basis points from its benchmark rate from late 2011.

Just a month ago the bank all but closed the door on further easing saying evidence of a pick-up in housing, consumption and inflation argued for a period of steady policy.

As a result markets barely reacted to Stevens' latest remarks. The Australian dollar stood at $0.9095 , holding onto much of the gains made on Wednesday after data showed the economy accelerated to 2.8 percent in the fourth quarter, the fastest pace in a year.

Stevens, however, said Australia's potential growth rate was closer to 3 percent and slightly above.

He warned there were still many uncertainties in the central bank's economic outlook, "not least the 'handover' from mining investment spending to sources of demand outside mining."

"In some important respects, the basis for such a handover is coming into place," he said, but added that no one can guarantee the trend will continue.

"Monetary policy can have a powerful effect on the general environment, but it cannot hope to fine-tune the quarterly or even annual path of aggregate demand," he said.

(Reporting by Ian Chua; Editing by Shri Navaratnam)

((ian.chua@thomsonreuters.com)(+6129373 1871)(Reuters Messaging: ian.chua.thomsonreuters.com@reuters.net))

Keywords: AUSTRALIA RBA/TESTIMONY