Australia’s RBA remains upbeat despite possible economic contraction in Q3
Coronavirus lockdowns were expected to result in a huge decline in the economy this quarter, the Reserve Bank of Australia shared on Tuesday. However, the central bank remained optimistic that activity would recover quickly as regulations softened in the coming months.
Lockdown across Sydney, Melbourne, and Canberra would drive economic contraction by at least 2% or possibly higher, RBA Governor Philip Lowe said.
Lowe added that unemployment will likely hit the “high fives” for a short time, with the unemployment rate at 4.6% in July.
He also maintained that interest rate hikes from record lows were unlikely until 2024 due to consistent weak wage expansion.
Wage growth in Australia is at measly 1.7%. Lowe claimed it should reach at least 3% to meet the inflation target band of 2-3%, which has not been touched since 2015.
Meanwhile, the government considers lifting some restrictions starting mid-October as inoculation drives progress, giving some kind of hope for recovery.