Australia Interest Rate1990-2021 Data | 2022-2023 Forecast | Calendar | Historical

The current Delta outbreak and lockdowns are a significant setback for Australia that would cause a sharp GDP contraction in Q3 of 2021, likely to be at least 2% and possibly significantly more, the Reserve Bank of Australia's Governor Philip Lowe said in a speech. However, the economy will start to recover quickly in Q4, amid a rapid pick up in vaccinations which should allow restrictions to be eased. “While it is hard to be precise about the pace and timing of this bounce-back, in the RBA’s central scenario, economic activity is expected to be back on its pre-Delta track by the second half of next year,” Lowe said. He reiterated that interest rates were not expected to rise from record lows until 2024 given the persistently sluggish growth of wages in the country. Lowe added that tightening would require wages growth above 3%, from the current 1.7% pace.

The Reserve Bank of Australia kept the cash rate unchanged at a record low of 0.1% during its September meeting, as widely expected, while confirming plans to trim purchase government bonds to A$4 billion a week and determining to do it until at east mid-February 2022. Regarding the economic outlook, the central bank said GDP is expected to fall materially in Q3, with the jobless rate to move higher in the coming months. As vaccination rates increase further and restrictions are eased, the economy should bounce back, it added. That said, the board noted that the timing and pace of this bounce-back are likely to be slower than that earlier in the year. Policymakers reaffirmed their commitment to maintaining supportive monetary conditions and not increasing the cash rate until inflation is within the 2 to 3% target range, a condition that will not be met before 2024.

The recent outbreaks of the Delta variant of COVID-19 and accompanying lockdowns in Australia have interrupted the recovery and introduced a high degree of uncertainty to the outlook for H2 2021, minutes from the RBA's August monetary policy meeting showed. However, the economy had entered the current coronavirus situations with more momentum than previously expected, and fiscal and monetary aid was already cushioning the economic effects. "Members considered the case for delaying the tapering of bond purchases to $4 billion a week currently scheduled for September 2021," it noted. That said, the bond purchase program will continue to be reviewed in light of economic conditions and the health situation, and their implications for the expected progress towards full employment and the inflation target. The board reiterated it will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range, a condition that will not be met before 2024.

The recent outbreaks of the Delta variant of the COVID-19 virus in Australia are interrupting economic recovery, the Reserve Bank of Australia's Monetary Policy Statement showed. "The near-term outlook is highly uncertain and dependent on health outcomes," it added, highlighting that further large outbreaks are possible, but the need for extended lockdowns should diminish as vaccination coverage increases. The central bank mentioned that Australia's GDP will contract noticeably in Q3 and that employment will fall and the unemployment rate increase for a time. Under the baseline scenario, output and employment are expected to have returned to their previously anticipated paths by early next year. GDP growth is expected to be a little over 4% in 2022 and around 2-1/2% in 2023. The jobless rate is expected to resume its downward path, approaching 4% by the end of 2023. The board reiterated it will not raise the cash rate until inflation is sustainably within 2 to 3%.