CANBERRA, AAP – Economists do not expect the Reserve Bank to start raising interest rates any time soon, despite indicators in recent weeks appearing to show Australia’s economic recovery is in full swing.
The central bank will hold its first board meeting for the year on Tuesday.
Since its last gathering in early December, economic growth has accelerated out of the first recession since the early 1990s.
Unemployment has also unexpectedly fallen, business conditions have surged to a two-year high, retail spending is in an upward trend and house prices have struck record highs, which has been accompanied by huge demand for mortgages.
But while the latest inflation figures were slightly stronger than expected for the final three months of 2020, annual inflation and its underlying measures remain subdued.
The annual rate of the consumer price index ended the year at just 0.9 per cent.
The Reserve Bank has repeatedly said – since cutting the cash rate to a record low 0.1 per cent last November – it will not raise interest rates until inflation is sustainably within its two to three per cent target.
It did not expect that to happen to 2023.
Economists will be scrutinising governor Philip Lowe’s post-meeting statement for the board’s view of the state of the economy and any change in its monetary policy outlook.
In particular, they will look for any further announcement on its bond-buying or quantatitive easing program, which is aimed at keeping longer term market interest rates, and in turn borrowing costs, low.
In November, it announced a $100 billion buying program of both federal and state government bonds over a six-month period, but added it would keep this under review in light of the evolving outlook for jobs and inflation.
Dr Lowe has the chance to expand on the view of the board in an address to the National Press Club in Canberra on Wednesday.
He will also be quizzed by the House of Representatives economics committee on Friday and when the Reserve Bank releases its quarterly statement on monetary policy, which will contain its latest economic forecasts.
The weekly consumer confidence index – a pointer to future household spending – is also released on Tuesday.
The Australian Bureau of Statistics will issue its weekly payroll jobs report, a series that was introduced to give a more frequent gauge on the state of the economy during the pandemic.