The Australian Banking Association’s 2021 Banking Conference will not begin today due to new COVID-related restrictions in Sydney.
As such, a highly anticipated speech by Reserve Bank of Australia (RBA) Governor Philip Lowe has been postponed. Investors and executives are eagerly waiting for any indication as to the direction the RBA will take in their July 6 monetary policy meeting. A stronger-than-expected May jobs report revealed 115,000 jobs were created and the unemployment rate dropped below pre-pandemic levels to 5.1%. Additionally, consumer spending is expected to expand as virus outbreaks are contained locally, preventing prolonged nationwide lockdowns.
Despite such positive data, Governor Lowe has reiterated that the central bank is committed to waiting until inflation rates rise sustainably to 2-3% before raising interest rates and trimming bond purchases. This will likely rely on rising wages stemming from the growing labor shortage and companies benefiting from exports and surging commodity prices. Demand for iron ore and liquified natural gas in particular continue to help drive the economic rebound. Expect the RBA to mirror the central banks of other wealthy nations and accelerate plans to tighten monetary policy with a potential interest rate hike in late 2023.
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Julian is a Research Analyst for The Daily Brief where he is a regular contributor. As a researcher and writer, Julian specializes in the political economy of East Asia and global macroeconomic developments.