Australia’s central bank maintained its glass half full view, reinforcing that the economy has emerged from its soft patch, while forecasting no acceleration in wage growth and core inflation barely reaching the bottom of its target.
In its quarterly update of the economic outlook released in Sydney Friday, the Reserve Bank predicted the economy would grow 2.25% this year, lifting to 2.75% in December 2020 and 3% in 2021. It said the expansion will be underpinned by consumption fueled by interest-rate and tax cuts and rising house prices.
“These forecasts imply some progress towards the medium- term inflation and full-employment goals, but this progress is expected to be gradual,” the RBA’s Statement on Monetary Policy said. It noted world markets “appear to have passed a trough of pessimism” and this allows “time to assess the effects of the recent easing of monetary policy” and the global picture.
The RBA reiterated that it’s prepared to ease further if needed, following three rate cuts since June to try to reinvigorate growth and hiring. Unemployment is predicted to hold around the current 5.2% through to the end of next year, before dropping to 5%, and the RBA acknowledged this is still “somewhat short” of full employment.
In a section reflecting on October’s decision to reduce the cash rate to 0.75%, the RBA said the board was mindful rates were already very low and “each further cut brings closer the point at which other policy options might come into play.” That appeared to be a reference to unorthodox measures.
Source : Bloomberg