* Cash rate to stay near zero for a long time to come – Lowe<\/p>\n
* RBA board wants to see inflation within 2%-3% target range<\/p>\n
* RBA forecasts imply inflation may undershoot target for several years<\/p>\n
* RBA watching for signs of fall in lending standards amid house price surge<\/p>\n
* Aussie dollar near two-month trough, 10-yr bond futures ease (Recasts top with fresh comments from governor, market reaction)<\/p>\n
SYDNEY, Feb 3 (Reuters) – Australia\u2019s top central banker pledged on Wednesday to keep interest rates near zero until there were enough jobs in the economy to push wages growth and inflation higher, a goal that has eluded the country for more than a decade.<\/p>\n
Reserve Bank of Australia (RBA) Governor Philip Lowe reckons it will be another three years before policymakers achieve their objective, meaning policy will stay accommodative at least until 2024.<\/p>\n
\u201cWe\u2019ve got to get back to an unemployment rate of four point something to get the type of wage pressures that will deliver inflation outcomes consistently 2.5% on average. That still seems a long way away,\u201d Lowe said, responding to questions in Canberra following a speech titled \u2018The Year Ahead\u2019.<\/p>\n
The jobless rate is hovering around 6.5% after jumping to 7.5% last year in the wake of the coronavirus pandemic-driven recession.<\/p>\n
The RBA doesn\u2019t see the rate hitting 4% through its forecast horizon. Wage growth at 1.4% is less than half the pace of what Lowe had said was needed to ignite inflationary pressures.<\/p>\n
\u201cWe will not be adjusting interest rates until we\u2019re confident that inflation is going to be back solidly between 2% and 3%,\u201d Lowe added.<\/p>\n
\u201cAnd because of the link to the labour market we see that being a long time away and that\u2019s why we\u2019re confident in saying that it\u2019s unlikely that interest rates go up for three years.\u201d<\/p>\n
The RBA held its cash rate at a record low 0.1% on Tuesday, and surprised the market by extending its bond buying programme by another A$100 billion ($76 billion).<\/p>\n
Lowe said the stimulus was working as expected, including keeping a lid on the local dollar, and welcomed the relative outperformance of Australia\u2019s A$2 trillion economy after largely controlling its coronavirus outbreak.<\/p>\n
Lowe\u2019s remarks prompted economists to predict the RBA would extend its bond buying programme again later this year. \u201cThe door is clearly open to QE-3 and we think further extension is likely,\u201d said RBC economist Su-Lin Ong.<\/p>\n
The Aussie was last at $0.7612, not far from a two-month trough of $0.7564 touched on Tuesday. Ten-year bond futures eased a little but were above a recent three-week low at 98.815.<\/p>\n
Australia\u2019s worst downturn since the Great Depression, rising unemployment and feeble inflation prompted the RBA to slash the cash rate three times last year and boost its balance sheet from A$180 billion to A$330 billion.<\/p>\n
The federal government joined in by unleashing a A$300 billion fiscal spending plan.<\/p>\n
The stimulus has ignited a fire in the housing market where prices are at record highs, home loans have surged and approvals to build standalone houses have jumped 55% over the past year.<\/p>\n
The resurgence in the property market supports household balance sheets and encourages spending through positive wealth effects, Lowe said, noting higher prices can also encourage further residential construction.<\/p>\n
\u201cI find it hard to express concerns about the development in asset prices to date,\u201d Lowe said when asked if he was worried about a housing bubble.<\/p>\n
\u201cThe issue for us would be if on the back of rising house prices people were borrowing a lot of money and they weren\u2019t doing that sensibly,\u201d Lowe said, adding regulators would step in if that were to happen.<\/p>\n