The Reserve Bank of Australia (RBA) has announced the national interest rate will remain on hold at the historic low of 0.1 per cent.
The RBA elected to keep the cash rate on hold at the record-low amid coronavirus Delta-strain outbreaks.
Governor Philip Lowe reiterated it would not increase the cash rate until inflation rises to a sustainable target of 2 to 3 per cent.
“The Board is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target,” Dr Lowe said.
Dr Lowe noted that prior to the latest outbreaks and lockdowns, Australia was seeing considerable momentum. Over the year to the June quarter, the Wage Price Index increased by just 1.7 per cent.
However, these recovery efforts were interrupted by the Delta outbreak.
“This setback to the economic expansion is expected to be only temporary. The Delta outbreak is expected to delay, but not derail, the recovery,” Dr Lowe said.
“As vaccination rates increase further and restrictions are eased, the economy should bounce back. There is, however, uncertainty about the timing and pace of this bounce-back and it is likely to be slower than that earlier in the year.
“Much will depend on the health situation and the easing of restrictions on activity. In our central scenario, the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year.”
Dr Lowe noted housing prices would continue to rise, although he anticipated a decline in turnover in some markets due to outbreaks and lockdowns.
“Housing credit growth has picked up due to stronger demand for credit by both owner-occupiers and investors,” Dr Lowe said.
“Given the environment of rising housing prices and low interest rates, the bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
Dr Lowe also pointed out the accommodative financial conditions would assist in supporting Australia’s economic recovery, with borrowing rates at record lows.
Summary of the RBA’s decisions
- Maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances of zero per cent
- The RBA will not increase the cash rate until inflation rises to a sustainable target of 2 to 3 per cent.
- Maintain the target of 10 basis points for the April 2024 Australian Government bond
- Purchase government securities at the rate of $4 billion a week and to continue the purchases at this rate until at least mid February 2022