Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
Reserve Bank Governor Philip Lowe says economic figures released over the summer are consistent with the central bank’s expectation of a pick-up in growth over the next few years.
Commenting after the Reserve Bank’s first board meeting of the year, Dr Lowe said the various forward indicators of employment point to further solid jobs growth with a further gradual reduction in the unemployment rate.
However, wage growth remains low.
“This is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time,” Dr Lowe said in a statement on Tuesday.
As widely expected – more so on a day when the Australian stock market tumbled three per cent following a steep drop on Wall Street – the central bank left the cash rate at 1.5 per cent for another month.
The rate has remained at this record low since August 2016.
“The low level of interest rates is continuing to support the Australian economy,” Dr Lowe said.
“Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.”
Even so, the central bank expects economic growth to pick up to an average of a bit above three per cent over the next couple of years.
New retail spending figures for the December quarter provided a solid base for the economic growth result due to be released on March 7, rising 0.9 per cent and a marked rebound from the limp 0.1 per cent rise in the previous three months.
However, BIS Oxford Economics’ Sarah Hunter described the average for the final two quarters of 2017 of 0.5 per cent as “somewhat subdued.”
“We don’t see this pace picking up anytime soon, primarily because we think it will be 12 to 18 months before wages growth really takes off,” she told AAP.
Retail spending for the month of December was also disappointing, dropping 0.5 per cent after the 1.3 per cent jump in November, which had been fuelled by the iPhone X launch.
Australian Retailers Association executive director Russell Zimmerman said the result represented a conservative Christmas instead of the merry one retailers had in mind.
“Although these figures are more conservative than retailers would have liked, we are hopeful that the improving economy will spur growth for retailers across the country in 2018,” he said in a statement.
The weekly ANZ-Roy Morgan consumer confidence index backed those hopes, rising a further 1.5 per cent to its highest level since November 2010.
ANZ head of Australian economics David Plank said rising confidence had been driven by a sustained improvement in views towards the economic outlook.
“This likely reflects strength in the domestic labour market as well as a global synchronised pick-up in activity,” he said.