RBA makes December rate call

The RBA has had its final say on interest rates for the year as Australia enters a critical period for its economic recovery.

The RBA has left rates on hold after lowering them to a record low of 0.1 per cent and launching Australia’s first fully-fledged quantitative easing program in November.

"In Australia, the economic recovery is under way and recent data have generally been better than expected. This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support,” governor Philip Lowe said in a statement.

Mr Lowe has previously indicated that rates are highly unlikely to rise until the RBA sees substantial progress on its efforts to return Australia to full employment – around 5 per cent. That could take up to three years, with AMP Capital’s Shane Oliver anticipating the next hike to come sometime in 2024. Other commentators see Australia’s economic fortunes turning somewhat sooner, with CBA head of Australian economics Gareth Aird anticipating that employment will hit 5 per cent in 2022 off the back of a “faster and stronger” recovery.

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Further rate cuts appear highly unlikely given Mr Lowe’s public dislike of negative rates and the fact that the ball is now squarely in fiscal’s court, with the government’s budget measures  expected to do most of the heavy lifting for Australia’s recovery. Third quarter GDP, released Wednesday, is expected to reveal a sharp rise in economic activity off the back of re-openings.

RBA makes December rate call
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