The Reserve Bank of Australia decided March 6 to keep its cash rate unchanged at 1.50% amid expectations of an improved economy and employment growth in 2018.
Governor Philip Lowe said that "the low level of interest rates is continuing to support the Australian economy" and that holding steady the monetary policy stance would be "consistent with sustainable growth in the economy and achieving the inflation target over time."
The central bank expects the Australian economy to grow faster in 2018 than in 2017 on the back of positive business conditions, rising non-mining business investment, higher public infrastructure investment, and an expected spurt in exports growth. But household consumption continues to provide uncertainty, he said.
Lowe added that indicators point to solid employment growth and he expects a further gradual reduction in the unemployment rate. He said employment has been steadily rising in all Australian states along with a "significant" rise in labor force participation.
Despite the improving labor market, Lowe said wage growth remained low and the trend will "likely to continue for a while yet."
Inflation remains low with CPI and underlying inflation a little below 2%, reflecting low labor cost increases and strong retail competition. Lowe expects inflation to gradually rise as the economy strengthens, citing a 2018 CPI inflation forecast of slightly above 2%.
Household debt remains high but the central bank governor said the Australian Prudential Regulation Authority's supervisory measures and tighter credit standards have helped contain the risk build-up in household balance sheets.
