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Financial News: RBA Chief: Period Of Strong Employment Growth Needed

RBA Chief: Period Of Strong Employment Growth Needed To Bring Jobless Rate Sustainably In "low 4s"

07/08/2021 - 02:26:00 (RTTNews)

(RTTNews) - Reserve Bank of Australia Governor Philip Lowe said the unemployment rate will need to be sustained in "the low 4s" for the economy to be considered to be operating at full employment.

A further period of strong employment growth will be required to bring the unemployment rate sustainably in the low 4s, Lowe told the Economic Society of Australia via a webinar on Thursday. Underemployment will also need to decline further.

Citing relationship between income growth and unemployment, Lowe said tighter labor markets do generate stronger wage increases - the laws of supply and demand still work. And second, the relationship seems to be stronger at unemployment rates below 5 percent, Lowe said.

The central bank strategy is to get the unemployment rate down so that wages growth picks up and inflation returns in a sustainable way to the target range.

The RBA expects that it will take until 2024 for inflation to be sustainably within the 2 to 3 percent target range.

The governor reiterated that the condition for an increase in the cash rate depends upon the data, not the date; it is based on inflation outcomes, not the calendar. The recent decision of the central bank to reduce the bond purchases from A$5 billion to A$4 billion a week does not represent a withdrawal of support by the RBA, Lowe added.

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08/01/2021 - 21:50 PM (RTTNews)
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