RBA Signals Easing As Wage Growth Unlikely To Pick Up
November 07 2019 - 7:56PM
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Australia's central bank signaled further easing as wage growth
is not expected to pick up and inflation set to remain below the
target band.
In its quarterly statement on monetary policy, released on
Friday, the Reserve Bank of Australia said wage growth is no longer
expected to pick up but the labor market and inflation forecasts
were little changed from August.
At the October meeting, the board said it was mindful that rates
were already very low and that each further cut brings closer the
point at which other policy options might come into play, RBA said
in the statement today.
This represents a more open approach to the discussion around
unconventional policies, Bill Evans, an economist at Westpac
said.
There is no firm commitment to move in that direction but the
wording indicates that such a transition to other options may be
considered to be a normal approach to policy, Evans added.
The central bank had reduced the rate by 25 basis points in
October after lowering it in June and July.
A larger-than-expected contraction in dwelling investment could
delay the gradual improvement in GDP growth.
The economy is forecast to grow 2.5 percent in the financial
year ending June 2020 and 3 percent in the year ending June 2021.
The outlook for 2020 was lowered from 2.75 percent, while the 2021
projection was retained.
The bank said the growth will be underpinned by low interest
rates, tax cuts, ongoing infrastructure spending, the upswing in
housing prices in some markets and a brighter outlook for the
resource sector.
Inflation is expected to increase a little over the forecast
period as labor market spare capacity declines a little and as
growth picks up to above potential, the bank said. Inflation is
seen at 2 percent in the year ending June 2020 and 1.75 percent in
June 2021.
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