The Reserve Bank has kept official interest rates on hold at their record low of 0.1 per cent.
Despite property prices skyrocketing and the economy beginning to bounce back from the COVID-19 pandemic, the RBA says inflation and wages growth is still too low.
“Lending rates for most borrowers are at record lows and housing prices across Australia have increased recently,” RBA Governor Philip Lowe said.
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“Housing credit growth to owner-occupiers has picked up, but investor and business credit growth remain weak.
“Lending standards remain sound and it is important that they remain so in an environment of rising housing prices and low interest rates.”
Governor Lowe said while the path ahead is likely to remain “bumpy and uneven” there are better prospects for a sustained recovery than there were a few months ago.
“Wage and price pressures are subdued and are expected to remain so for some years,” he said.
“The economy is still operating with considerable spare capacity and the unemployment rate remains higher than it has been for some years.
“Further progress in reducing spare capacity is expected, but it will be some time before the labour market is tight enough to generate wage increases that are consistent with achieving the inflation target.”
Because of this, he said rates are not expected to start rising again until at least 2024.
“The Board remains committed to maintaining highly supportive monetary conditions until its goals are achieved.
“The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.
“For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market.
“The Board does not expect these conditions to be met until 2024 at the earliest.”