The Reserve Bank of Australia has upgraded its outlook for the domestic economy and is tipping the unemployment rate to fall below 5 per cent.
As expected, the RBA left the official interest rate unchanged for the 27th consecutive month at its monetary policy meeting on Tuesday.
RBA governor Philip Lowe said in a statement that economic growth was forecast to average about 3½ per cent this year and in 2019.
The central bank’s outlook for the labour market was also more positive, with the RBA tipping the jobless rate to decline to 4¾ per cent in 2020, from 5 per cent in September.
“The vacancy rate is high and there are reports of skills shortages in some areas,” the RBA’s statement said.
The central bank has held interest rates steady at 1.5 per cent since cutting the country’s cash rate by 0.25 of a percentage point in August 2016, a move that heralded the start of a record-breaking run of monetary policy inaction.
The central bank is waiting for falling unemployment to translate into a sustainable increase in wages to bring inflation firmly back into its 2 to 3 per cent target range.
Meanwhile, consumer confidence rose 1.9 per cent, according to the latest weekly reading by the ANZ-Roy Morgan survey, meaning consumer sentiment has regained almost two-thirds of the drop suffered on the weekend of the Wentworth byelection.
More to come.