Reserve Bank of Australia assistant governor Sarah Hunter. — Bloomberg
Canberra: Australia’s central bank is “pretty close” to getting inflation back to the midpoint of its 2% to 3% target while the economy is near full employment, assistant governor Sarah Hunter says.
“We are monitoring, we’ll wait and see,” Hunter told an industry event in Sydney on yesterday. “The board will set policy accordingly. So we never quite know, but right now we hope we can keep things where they are today.”
The Reserve Bank of Australia’s (RBA) policy-setting board next meets Sept 29 and 30, and most economists and traders expect it will keep the cash rate unchanged at 3.6%.
Economists widely expect the RBA to cut for a fourth time this year in November and follow that up with another reduction early next year for a terminal rate of 3.1%.
Hunter’s comments come ahead of data tomorrow that is likely to show Australia’s unemployment rate remained unchanged at 4.2% in August.
Figures for the monthly inflation indicator are due out next week.
The assistant governor reminded the audience that the series is volatile and doesn’t provide a clear reading of price changes.
She pointed to a nascent recovery in consumer demand and said the central bank is watching the sector “very closely” given “it’s a key factor in the economy”. Household spending accounts for about half of the country’s gross domestic product.
Hunter said households, on average, are past the worst of a cost-of-living squeeze, though overall price levels are unlikely to return to pre-Covid levels.
She said lending to businesses is growing at a “pretty healthy” pace while mortgages have picked up as well, helped by the central bank’s three rate cuts so far this year.
“We want the economy just in balance, a bit of a Goldilocks outcome. That’s what we’re aiming for,” Hunter said.
“We’ll get shocks down the track for sure,” she acknowledged. “We don’t know exactly what’s coming but we really want to get that balance right for everybody.” — Bloomberg
