The Reserve Bank has reiterated that its increasing optimism about the Australian economy does not mean the cash rate will be moving any time soon.
The RBA this week kept the cash rate at a record low 1.5 per cent for a 27th straight month, but did note it expects growth to be stronger and unemployment to be lower than its previous projections.
‘If that progress is made, higher interest rates are likely to be appropriate at some point,’ the RBA said in its latest statement on monetary policy released on Friday.
‘However, given the expected gradual nature of that progress, the board does not see a strong case to adjust the cash rate in the near term.’
The RBA this week tweaked its 2020 unemployment forecast from 5.0 per cent to 4.75 per cent.
On Friday, it confirmed it expected wages growth to drift upwards as the labour market tightens – albeit not quickly enough to send inflation spiking.
‘That said, wages growth has been slower to pick up than its historical relationship with indicators of spare capacity in the labour market would imply,’ the RBA said.
‘The bank’s forecasts assume that this departure from past experience will persist for a while yet.’