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Justin Smirk, Research Analyst at Westpac, notes that RBA Governor, Philip Lowe, at the ECB Forum on Central Banking has reminded the audience that the RBA has a triple mandate but also believes that household debt is still more important than low inflation.

Key Quotes

“Governor Lowe opened his comments with the observation that he felt he was the odd one out; a central bank governor that had not experienced negative interest rates, had avoided implementing QE and does not provide forward guidance.”

“But he then noted the striking similarity in the Australian economy with most other economies in that inflation is presently low, or the target range, and that wage outcomes continue to disappoint despite a tightening labour market.”

“His most important points were in reference to observations that are quite unique to Australia.”

“The first was that he reminded everyone that the RBA does not have a single, or even double, mandate but a triple mandate. They are price stability (as defined by the stability of the currency), full employment, and the economic prosperity and welfare of the Australian people.”

“He stressed this as why he was comfortable with inflation being under the band and felt no pressure to cut rates in the hope it might stimulate more inflation.”

“With wages growing at just 2%yr the Governor noted that with productivity it is very likely that inflation will continue to undershoot the target for some time. In this case, he argued, that patience was the best policy.”

“If there is any policy takeout it is that the Governor was emphasising a clear on ‘hold for as long as required’ policy stance.”

“The RBA is clearly comfortable with the current settings and it does not believe that it is in the interest of the welfare of the nation to propose a rate cut any time in the foreseeable future.”