Reserve Bank of Australia Governor Philip Lowe said the conditions required to lift the key cash rate would not be met before 2024 and market expectations for an early rate hike is out of place.
In a speech to the Anika Foundation in Sydney on Tuesday, Lowe said “I find it difficult to understand why rate rises are being priced in next year or early 2023.”
“While policy rates might be increased in other countries over this timeframe, our wage and inflation experience is quite different,” he added.
Given that the recovery has been delayed, it would be appropriate to delay any
consideration of a further taper in bond purchases until next year, Lowe said.
“By February we will know more about how the economy is responding to the easing of restrictions than we will know in November,” he added.
At the September meeting, the RBA pressed ahead with tapering its asset purchases. The board decided to purchase government securities at the rate of A$4 billion a week and extended the duration by three months to at least mid February.
Although the Delta outbreak has delayed the economic recovery, it has not derailed it, Lowe said. He expects the economy to be growing again in the December quarter, with the recovery continuing into 2022.
On labor market, Lowe said total hours worked are set to fall 3-4 percent in the September quarter. There is uncertainty about the unemployment rate but it would not be surprising to see readings in the high fives for a short period of time.
Elsewhere, a survey from the National Australia Bank showed that both business conditions and confidence saw a small improvement in the month, though the latter remained well into negative territory.
The business conditions index rose 4 points to +14 in August after declining sharply over the previous two months. At the same time, the business confidence also improved slightly, up two points to -5.
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