SYDNEY–The Reserve Bank of Australia on Tuesday announced an unexpected extension of its government bond-buying program when the current one expires in April, signaling its determination to support the economy as it emerges from recession while also putting maximum downward pressure on the Australian dollar.
RBA Gov. Philip Lowe said Australia’s economic recovery “is well under way and has been stronger than was earlier expected.”
Still, the economy is expected to operate with considerable spare capacity for some time, he said.
The unemployment rate remains higher than it has been for the past two decades, and while it is expected to decline, the RBA’s central scenario is for unemployment to be around 6% at the end of this year and 5.5% at the end of 2022, Mr. Lowe said.
The RBA expects gross domestic product to rise 3.5% over both 2021 and 2022.
“These outcomes have been underpinned by Australia’s success on the health front and the very significant fiscal and monetary support,” he said.
The central bank left its official cash rate at 0.10% and will continue to target three-year government-bond yields at 0.10%
The continuing monetary support from the RBA comes as the job market rebounds solidly and house prices climb in response to record-low mortgage interest rates and significant government stimulus.
Australia has succeeded in containing the coronavirus, while a surge in household spending has helped lift GDP, allowing the resource-rich economy to shrug off its first recession in nearly 30 years.
The RBA continues to set the bar high for interest-rate increases, saying it will require significant gains in employment and a return to a tight labor market.
“The Board does not expect these conditions to be met until 2024 at the earliest,” Mr. Lowe said.
Mr. Lowe will give a speech on the year ahead on Wednesday and address parliament on Friday on the central bank’s outlook for the economy.
@Newswires
