The Reserve Bank has left interest rates on hold again despite Australia’s better-than-expected economic recovery and the booming housing market.
The official cash rate has now been at that level since November 2020 but the RBA still doesn’t expect rates to start rising again until 2024.
The RBA is forecasting Australia’s economy to grow by 4.75 per cent this year but warns there is still plenty of uncertainty and the threat of further outbreaks of COVID-19.
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GDP figures for the March quarter will be released on Wednesday.
The RBA also highlighted the faster-than-expected drop in unemployment which has fallen to 5.5 per cent.
The central bank is expecting the jobless rate to get as low as 5 per cent by the end of this year.
It also indicated it will be keeping a close eye on Australia’s housing market with prices increasing in all major markets while there has been strong demand from owner-occupiers.
Figures released by CoreLogic on Tuesday show house prices rose another 2.2 per cent across the country in May and are up 10.6 per cent for the year.
But it is low inflation and wages growth that will keep interest rates low for some time.
While the RBA is predicting inflation and wages growth to pick up, it’s only expecting that increase to be gradual and modest.
“The Board is committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target,” RBA Governor Philip Lowe said in a statement.
“It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently.
“This is unlikely to be until 2024 at the earliest.”