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Summary
- The Reserve Bank of Australia (RBA) on Tuesday kept official interest rate unchanged at 0.1%.
- The RBA, however, upgraded the gross domestic product (GDP) growth scenario, with growth of 4.75% expected over 2021 and 3.5% over 2022.
- RBA Governor Philip Lowe said that Australia’s economic recovery has been faster than expected earlier.
The Reserve Bank of Australia (RBA) on Tuesday kept both official interest rate and yield target on the three-year bond yield unchanged 0.1%. The RBA, however, upgraded the gross domestic product (GDP) growth scenario, with growth of 4% expected over 2021 and 3% over 2022.
RBA Governor Philip Lowe said that Australia’s economic recovery has been faster than expected earlier. Even as the global economy continued to recover amid coronavirus pandemic, the growth outlook remained robust for 2021 and 2022, Low added.
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Strong growth in employment
The Australian economy’s recovery could be seen from the robust growth in employment. The unemployment rate fell further to 5.6% in March and the number of people with a job now exceeding the pre-pandemic level. The business investment is expected to improve, and household spending would be boosted by the strengthening in balance sheets over the past year. The unemployment rate may fall to 5% at the end of this year and nearly 4% at the end of 2022.
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RBA on inflation
In the monetary policy statement, Lowe said that inflation was low and below the target set by the RBA. The inflation in underlying terms may be 1% this year and 2% in mid-2023. In the short term, consumer price index (CPI)measured inflation may surge temporarily to be above 3% in the June quarter, owing to reversal of some coronavirus-related price reductions.
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The RBA board also said that it would maintain highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It also said that the cash rate would not be increased until actual inflation was sustainably within the 2 to 3% target range.
Housing market
Lowe said the RBA was closely tracking the property market. "Housing markets have strengthened further, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers," said Lowe.
