Reserve Bank governor Philip Lowe says it is possible the Australian economy could perform better than the central bank is predicting if there is further good news on the COVID-19 vaccine front.
But in a speech on Monday, Dr Lowe also warned there was still considerable uncertainty about the outlook and an extended period of higher unemployment was likely to be a casualty of the first recession in nearly three decades.
“If we do get further good news on the health front, we could have a rapid rebound,” he told the Committee for Economic Development of Australia annual dinner.
Even so, population growth is forecast to record its slowest rate since the First World War and is one factor in a complex picture for the housing market.
The market is also simultaneously adjusting to a recession, record low interest rates and substantial government incentives to support residential construction, while the pandemic has changed the way people work, shop and live.
“So there are a lot of moving pieces at present and the effects are very uneven across different types of property and across the country,” he said.
He reiterated the central bank will not lift interest rates until actual inflation – rather than forecast – is sustainably within the two to three per cent target band, which will need materially higher wages growth than it is currently.
“This will require significant gains in employment and a return to a tight labour market,” the governor said.
In the Reserve Bank’s round of monetary policy easing earlier this month, which took the cash rate to a record low 0.1 per cent, it also entered into a $100 billion bond buying program known as quantatitive easing or QE.
Dr Lowe explained the affect of QE provides long-term, risk-free interest rates, while adding liquidity in the financial system.
His assistant governor for financial markets Christopher Kent is due to address the Australian Securitisation Forum 2020 on Tuesday, and the central bank will release the minutes of this month’s rate-cutting board meeting.
The weekly ANZ-Roy Morgan consumer confidence index is also due – a pointer to future household spending that last week struck 10 consecutive rises.
This week’s reading will take into account pharmaceutical giant Pfizer’s ongoing successes in developing a COVID-19 vaccine and an initial strong response from global share prices.
At the same time, the Australian Bureau of Statistics will release its weekly payrolls data and ahead of the labour force figures for October on Thursday.