RBA Governor Dr Philip Lowe has maintained that the cash rate will not change until wage growth and inflation are both 'comfortably' above the 2-3% threshold, with unemployment also improving.
"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," he said.
However, New Zealand's Reserve Bank (RBNZ) has signalled that it could raise its cash rate as early as mid-2022, pending more positive economic data.
CEO of digital lending platform 'WLTH' Brodie Haupt predicted the RBA will maintain its 2024 guidance on lifting the cash rate.
"Even with strong growth in the property market over the last few months, the RBA looks set to hold rates for the foreseeable future," he said.
"The RBA has continuously said that they won't be increasing the cash rate until inflation is back within the target range and with no sign of this at the moment, I can't see the rates lifting earlier than expected."
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APAC economist for jobs search site Indeed, Callam Pickering, explained the RBA's thinking behind maintaining the cash rate at 0.10%.
“Right now, the Australian economy is a mile away from justifying tighter monetary policy. The RBA hasn’t hit their inflation target in five-years, we haven’t had wage growth of 3% or higher in eight-years and the unemployment rate hasn’t been below 4.5% since 2008," he said.
Mortgage Choice CEO Susan Mitchell said today's rate decision was "unsurprising".
“Pleasingly, data from the Australian Bureau of Statistics (ABS) revealed that the unemployment rate continues on its downward trend, however, we’re a long way off seeing a marked improvement to wages growth," she said.
"There are signs the nation's economic recovery is on track but the latest lockdown in Victoria is a reminder that monetary and fiscal support will be required for some time yet."
RBA press release: main change from the Bank was the update on labour market progress that has been "faster than expected" NO change to the last paragraph, i.e. not change to forward guidance despite the data flow, keeping the foot down... #ausbiz pic.twitter.com/DscR1BNQ0R
— Alex Joiner (@IFM_Economist) June 1, 2021
Photo by Tim Bish on Unsplash
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