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The Australian economy is transitioning to expansion phase "earlier and with more momentum than anticipated," but even though the Reserve Bank of Australia has upgraded its growth, employment and wages forecasts it would still be around three years before key targets were met.

According to the RBA's quarterly Statement on Monetary Policy, released today, GDP growth under the bank's baseline scenario is expected to reach 4.75% in the final quarter of 2021, against the previously forecast 3.5%. The pace of growth would then slow, and the bank's June 2023 forecast is unchanged at 3%.

Unemployment, the main priority for the RBA, is now expected to fall to 4.5% by the end of 2022, driving a 2.25% increase in wages with consumer price inflation running at 1.5%.

The RBA's inflation target is between 2% and 3% and is key to any change in interest rate policy, but the bank does not see inflation reaching 2% until June 2023.

Despite the upgraded forecasts, the RBA repeated its view that conditions for a rise in official interest rates, currently at the record low of 0.10%, were "unlikely" to be reached "until 2024 at the earliest."