The central bank is worried about Australians’ spending habits, as pay packets remain stubbornly stagnant and household debt high.
As widely expected, the Reserve Bank of Australia left the official interest rate at 1.5 per cent for a 16th straight month when it met for the last time in 2017 on Tuesday.
Governor Philip Lowe said wages growth would remain weak for a while yet, though he noted reports of a skills shortage in the jobs market, which could put upward pressure on wages.
“The various forward-looking indicators continue to point to solid growth in employment over the period ahead,” he said in a statement.
“There are reports that some employers are finding it more difficult to hire workers with the necessary skills.”
The outlook for household consumption remained uncertain, Governor Lowe added.
“Household incomes are growing slowly and debt levels are high,” he said.
Retail spending growth hit a five-month high in October, but remains low on an annual basis at 1.8 per cent, according to Australian Bureau of Statistics figures released on Tuesday.
JP Morgan chief economist Sally Auld said it was concerning that household debt has climbed at a faster pace than incomes, despite a cooling of the property market.
“This means that the household debt to income ratio is yet to stabilise, and so gives the RBA little cause to celebrate on this front,” she said.
HSBC chief economist Paul Bloxham said a tightening labour market would likely lift wages and inflation in 2018, and he expects a rate hike during the second quarter of the year.
“Patience is the order of the day,” he said.
“Today’s statement relayed a similar tone to recent comments from the RBA, suggesting that the central bank is no hurry to make any policy changes.”
Many other economists do not expect the RBA to move again until late 2018.
Governor Lowe reiterated that the economy was expected to grow by an average of three per cent over the next few years and business conditions were positive.
“The outlook for non-mining business investment has improved further, with the forward-looking indicators being more positive than they have been for some time,” he said.