The RBA has left interest rates on hold for another month amid growing optimism on the national economy.
Reserve Bank governor Philip Lowe said the increasing confidence and gaining strength of the economy was likely to result in widespread wage gains but that it would take some time before that flowed on to higher inflation and interest rates.
Mr Lowe also said that in response to tighter lending restrictions from regulators banks are now well within the limits imposed.
Economic figures released today show growth in consumer spending which along with strong exports and infrastructure spending is stoking a growing optimism in Philip Lowe and the RBA.
Mr Lowe said employment growth had gathered momentum and investment was on the up as well.
“Inflation has troughed and it is likely to increase gradually over the next couple of years,” he said.
“These are positive developments.”
“Even so, it will be some time before we are what would be considered full employment in Australia…stimulatory monetary policy continues to be appropriate.”
Mr Lowe said he didn’t believe wages growth would stay stagnant forever.
“I don’t see it as a permanent state of affairs,” he said.
“It is likely that, as our economy strengthens and the demand for labour picks up, growth in wages will pick up too.”
The RBA again brought focus onto the strong property markets in Sydney and Melbourne and said they still expect a further cooling off in the coming months to allay fears of overheating.
Mr Lowe said regulatory restraints put on by APRA had been effective in helping the whole system pull back.
“Most lenders are now operating comfortably within the new restrictions and these measures are not unduly restraining the supply of overall housing credit,” he said.