Impact of Omicron on small expenses: RBA | Liverpool City Champion
The Reserve Bank of Australia says the economy has rebounded strongly from last year’s delta lockdowns and early signs indicate the effect of the Omicron variant on spending has been relatively small.
In its quarterly monetary policy statement released on Friday, the RBA said the economy is expected to have grown by 5% in 2021, down from 3% as previously forecast.
It now forecasts growth of 4.25% for 2022.
The national accounts for the December 2021 quarter are due on March 2.
Reiterating RBA Governor Philip Lowe’s comments earlier this week, the quarterly statement said it was too early to conclude that inflation is sustainably within the 2-3% target range.
“As the board has previously stated, it will not raise the cash rate until actual inflation is sustainably within the 2-3% target range,” the statement said.
At 2.6%, core inflation has just reached the midpoint of the target range for the first time in more than seven years.
“Therefore, the board is prepared to be patient as it monitors developments in the various factors affecting inflation in Australia,” he said.
But pushed during his speech at the National Press Club this week, Dr Lowe acknowledged it was ‘plausible’ that the RBA could raise the cash rate by a record 0.1% at the end of this year .
The inflation outlook has also been revised upwards, with the underlying interest rate sensitive rate expected to reach 3.25% by June this year and then stabilize at 2.75% until June. 2024 at least.
Annual wage growth is expected to have accelerated to almost 2.5% by the end of 2021, from 2.2% in the September quarter.
The wage price index for the December quarter is due on 23 February.
Looking further ahead, wage growth is expected to strengthen gradually as the unemployment rate declines, reaching 3.25% by mid-2024, which would be the fastest pace since 2012.
The unemployment rate is expected to fall further to 4% by June, from a 13-year low of 4.2% currently.
It should then fall even lower to 3.75%, breaking the 4% barrier for the first time in 50 years.
Prime Minister Scott Morrison earlier this week predicted a drop in the unemployment rate below 4% as he prepares for the federal election scheduled for May.
Australian Associated Press