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Summary
- The RBA has maintained its monetary policy stance.
- The central bank expects the Australian economy to grow by 4.75% in this year and 3.5% in 2022.
- The RBA Plans to reach 5% unemployment target by the end of 2021.
The Reserve Bank of Australia (RBA) has kept its monetary policy unchanged with interest rate near zero at its June meeting.
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As a result of the central bank’s decision, the cash rate would continue to be at 10 basis points; the yield on the three-year Australian Government bond would remain the same at 0.1%; and the interest rate on Exchange Settlement balances would remain 0%.
“The global economy is continuing to recover from the pandemic and the outlook is for strong growth this year and next. Global trade in goods has picked up strongly and commodity prices are mostly higher than at the start of the year. However, inflation in underlying terms remains low and below central bank targets,” Philip Lowe, Governor, RBA said in a statement.
The inflation in Australia, as on date, stands at 1.1% -- much below than that of other economies.
The apex bank is also expecting faster-than-expected economic recovery in the country – anticipating the gross domestic product (GDP) to grow by 4.75% in this year and 3.5% in 2022.
“This outlook is supported by fiscal measures and very accommodative financial conditions. An important ongoing source of uncertainty is the possibility of significant outbreaks of the virus, although this should diminish as more of the population is vaccinated,” Mr Lowe added.
The central bank also seems to be contended with the progress on bringing the unemployment rate below the target of 5%. In May, the Australian Bureau of Statistics reported that the unemployment rate has dipped to 5.5% -- just 50 bps above the target.
“Job vacancies are at a high level and a further decline in the unemployment rate to around 5% is expected by the end of this year. There are reports of labour shortages in some parts of the economy,” the governor added.
