CANBERRA, March 10: Reserve Bank of Australia (RBA) Governor Philip Lowe said that the country’s economy has performed better than expected in terms of pandemic recovery due to virus suppression and targeted stimulus measures.
In an address to the Australian Financial Review business summit, Lowe also reiterated the official interest rate would likely remain at 0.1 per cent despite concerns over increasing house prices.
Australia’s GDP increased by 3.1 per cent in the December quarter, following a 3.4 per cent lift in the previous three months.
“As a result, we are now within striking distance of recovering the pre-pandemic level of output,” Lowe said.
The RBA Governor said the figures were far better than was forecast in August 2020, reflecting the country’s success in containing the virus as well as the efficacy of fiscal and monetary policy support.
One of the monetary policy measures was to drop the official interest rate to the record low of 0.1 per cent at a meeting in November 2020, which Lowe acknowledged had been partially responsible for increasing prices in the country’s property market.
Despite some speculation that concerns over affordable housing would put pressure on the RBA to shift the interest rate, Lowe said changing the current rate before 2024 would be unlikely.
“I would like to reiterate that the RBA does not target housing prices, nor would it make sense to do so,” Lowe said.
“There are various tools, other than higher interest rates, to address these concerns, leaving monetary policy to maintain its strong focus on the recovery in the economy, jobs and wages.”
While many professions have been hard hit by the pandemic, Lowe said that the recovery in employment in Australia had been “V-shaped”, with the unemployment rate dipping to 6.4 per cent in January.
However, he warned that the downward trend in unemployment could be disrupted when the government’s employment stimulus scheme, JobKeeper comes to an end in late March.
“There are still many people who want a job and can’t find one and many others want to work more hours,” Lowe said.