In the minutes of April 5 meeting, RBA said, inflation in Australia had “picked up” and a “further increase was expected” with measures of underlying inflation in the March quarter expected to be above 3%. Wages growth had “picked up” too but “had been below rates likely to be consistent with inflation being sustainably at the target.” These developments have “brought forward the likely timing of the first increase in interest rates. ”

“Over coming months, important additional evidence will be available on both inflation and the evolution of labour costs. Consistent with its announced framework, the Board agreed that it would be appropriate to assess this evidence and other incoming information as it sets policy to support full employment in Australia and inflation outcomes consistent with the target.”

Full RBA minutes here.

In a speech, RBA Governor Philip Lowe said, “n the economy, our central message is that the Delta outbreak has delayed – but not derailed – the recovery of the Australian economy”. While the outbreak is a “significant setback”, there is a “clear path out of the current difficulties”.

Lowe provided some explanations to the decision to taper weekly asset purchases to AUD 4B, but extend the program till February next year. Firstly, give the delay in recovery, “we considered it appropriate that we delay any consideration of a further taper in our bond purchases until next year.” Continuing the with purchases will also “provide some additional insurance against downside scenarios.”

Secondly, fiscal policy is considered the “more effective policy instrument in responding to the Delta outbreak.” Public balance sheet can be used to “offset the hit to private incomes during the lockdown”. But monetary policy “works mainly on the demand side and the effects on income are felt with a lag”.

Thirdly, “by continuing to purchase government bonds at the rate of $4 billion a week we will be adding to the support provided to the economy during the recovery phase.”

Lowe also reiterated that the condition for lifting interest rate will “not be met before 2024”. A “tighter labor market” is needed to meet the condition, with wages growing by “at least 3 per cent”, comparing to the 1.7% yoy rate in Q2.

Full speech here.