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By Sophia Rodrigues
     SYDNEY (MNI) - The Reserve Bank of Australia expects interest rates to rise
at some point if its central forecasts materialize but the stance of monetary
policy could change if the risks around the forecasts come to pass, Deputy
Governor Guy Debelle said Tuesday.
     Debelle spoke in Sydney at the CFO Forum on the topic, "The outlook for the
Australian economy."
     Like recent speeches from Governor Philip Lowe, Debelle's speech had the
"glass half-full" touch as he talked about expectations of further progress on
both inflation and unemployment over the period ahead, though at a "gradual"
rate.
     "If the economy continues to evolve as expected, higher interest rates are
likely to be appropriate at some point. Notwithstanding this, the Board does not
currently see a strong case for a near-term adjustment in the cash rate," he
said.
     At the same time, he discussed some of the uncertainties around the
outlook, reminding that they had the potential to change the stance of monetary
policy.
     Among the uncertainties, Debelle cited global inflation outlook, trade
tensions and China as the ones from the global side. On the domestic side,
Debelle discussed household balance sheets as the main uncertainty and related
to them the risks from interest rate resets on interest-only mortgages, further
tightening in lending standards and low wages growth.
     "These are some of the uncertainties that the Board discusses in its
monetary policy deliberations. They are not the central case, but they are some
of the risks around it," Debelle said.
     "Should these risks come to pass, then they are likely to have a material
effect on the Bank's outlook for the economy. In turn, it is quite possible that
such revisions would be consequential for the Board's assessment of the
appropriate stance of monetary policy," he added.
     Talking about uncertainty from global inflation outlook, Debelle said a
rise in growth and inflation offshore could lead to a depreciation of the
Australian dollar, given that the Australian economy appears currently to have
more spare capacity than some other advanced economies. 
     "If this were to occur, we would expect it to boost domestic output and
lead to a faster rise in inflation than currently assumed, but somewhat later
than in other economies," he said,
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
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