RBA sees economy growing faster than potential rate in 2018

SYDNEY • Australia’s economy is this year expected to grow faster than its speed limit — estimated at 2.75% by Treasury — with inflation just above the bottom of its target, the central bank said in minutes of its April policy meeting.

The Reserve Bank of Australia (RBA) said it’s more likely the next move in the cash rate will be up rather than down. Given lowering unemployment and returning inflation to the midpoint of its 2%-3% target “was expected to be only gradual”, members agreed “there was not a strong case for a near-term adjustment in monetary policy”.

The outlook for non-mining business investment growth remained positive; forward-looking indicators suggested spare capacity in the labour market would continue to fall gradually. Weak wage growth and retail competition damping prices suggested inflation would remain low for some time.

The RBA maintained its balanced outlook; however, it said an upward revision of 2017 household consumption data was a positive surprise and consistent with the booming labour market last year.

The board has kept its key interest rate unchanged at a record-low 1.5% for 20 months as it aims to boost investment and hiring. — Bloomberg