RBA Governor Philip Lowe said in a speech that “we received further confirmation that the Australian economy is recovering well”, and “these better-than-expected outcomes are very welcome news”. However, “there is still a long way to go and that the Australian economy is operating well short of full capacity”.
“Over the past couple of weeks market pricing has implied an expectation of possible increases in the cash rate as early as late next year and then again in 2023”, he acknowledged. But, “this is not an expectation that we share”.
“Our judgement is that we are unlikely to see wages growth consistent with the inflation target before 2024,” he reiterated. “This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024.”
In the Q&A session, Lowe also said he’d be more “comfortable” if Australian Dollar’s exchange rate is lower, “because we need to get the unemployment rate down, inflation back to target and a lower currency would help us get there.” But the currency is not overvalued with commodity prices very high and interest rate differentials stable.
