RBA Governor Philip Lowe devoted a section on monetary policy is his address to Australia-Israel Chamber of Commerce (WA) today. And, he brought out four broad points.
1. He expects a “further pick-up” in the Australian economy, with increased investment, hiring and exports. Inflation is also expected to “gradually pick up” with wages growth too. But there are uncertainties “lying in the international arena”. Lowe warned that “a serious escalation of trade tensions would put the health of the global economy at risk and damage the Australian economy”. And, “we also have a lot riding on the Chinese authorities successfully managing the build-up of risk in their financial system.” Domestically, the level “high level of household debt remains a source of vulnerability”.
2. The next interest rate move will likely be “up, not down”. And that might “come as a shock to some people”.
3. Inflation returning to midpoint of target zone is expected to be “only gradual”. And, “it is still some time before we are likely to be at conventional estimates of full employment.
4. “Reserve Bank Board does not see a strong case for a near-term adjustment in monetary policy.” Lowe reiterated that other global central banks have lower policy rates than Australia “over the past decade”. So, the situations are different.
