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RBA ends 2017 on a high

20 December 2017

The Reserve Bank has signed out for the year on a high.

While the central bank is still wrestling with the ongoing problem of stagnant wages growth, it says things are slowly getting better.

The RBA is still concerned by increasing household debt while wage growth remains low but this is being partly offset by the improving unemployment figures, which are at a four-year low.

“Although wage growth had been a little lower than expected in the September quarter, it appeared to have stabilised at a low rate,” RBA governor Philip Lowe said in the bank’s latest minutes.

“Leading indicators of labour demand had been broadly consistent with continuing strength in the labour market.”

“In these circumstances, spare capacity in the labour market was expected to be absorbed gradually and wage growth was expected to pick up over time.”

Economists still aren’t expecting any interest rate hikes from the RBA in the first half of 2018 despite the upbeat end to the year.

The RBA minutes show the central bank continuing to balance low inflation against high household debt.

“Over the prior year or so, the unemployment rate had fallen and inflation had moved closer to target,” the minutes said.

“Recent data had increased confidence there would be further progress on those fronts.”

“How far and when stronger conditions in the economy and labour market might feed through into higher wage growth and inflation remained important considerations shaping the outlook.”

It has now been seven years since the RBA lifted interest rates, the longest time since the official cash rate was introduced in the early 1990s.

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