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RBA's Lowe: Aussie Economy To Break Out Of Rut
Tuesday, 5 September 2017 18:17 WIB | FISCAL & MONETARY |Moneter

Reserve Bank of Australia Gov. Philip Lowe remains confident the country will break out of its low-wage-growth, low-inflation rut.

In a speech just hours after the RBA opted to keep interest rates on hold, Mr. Lowe said he was optimistic that the laws of supply and demand still worked in the labor market.

"I am optimistic enough that I don't see it [low wage growth] as a permanent state of affairs. It is likely that, as our economy strengthens and the demand for labor picks up, growth in wages will pick up too," he said.

Flat pay has plagued the Australian consumer for some years, a situation that has contributed to record household debt levels as property prices soar.

Mr. Lowe acknowledged the global scale of the problem of low wage growth, adding that a slow expansion of pay overseas was also contributing to low inflation and slower economic growth elsewhere in the world.

"The slow growth in wages is contributing to low inflation outcomes globally. My expectation is that this is going to continue for a while yet, given that the structural factors at work are likely to persist," he added.

Still, Mr. Lowe said the current record low for official interest rates in Australia was helping to lift the economy, something most visible in the job market.

He said the number of Australians with jobs had picked up over recent months and cited the fall in the unemployment rate.

The RBA looks set to continue moving cautiously, conscious that inflation pressures remain benign, he added.

"The Board has been prepared to be patient and has not sought to overly engineer or fine-tune things. In our view, the balance we have struck is appropriate and it is likely that the economy will pick up from here as the drag from declining mining investment comes to an end," he added.

Mr. Lowe's comments come the day before Australia releases growth figures for the second quarter that are expected to show a strong rebound from the first three months of the year.

The RBA's central scenario is for growth of around 3% over the next couple of years and for the unemployment rate to move lower gradually.

 

Source: MarketWatch

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