Australia's economy performed better than expected over the past year, but very significant monetary support will still be needed for some while yet, the country's top central banker said on Friday.
The Reserve Bank of Australia (RBA) this week left its cash rate at a record low 0.1%, but surprised by extending its quantitative easing programme by another A$100 billion ($76.01 billion) from mid-April.
Speaking before a parliamentary economics committee in Canberra, Governor Philip Lowe said these settings will need to be maintained until inflation reaches the RBA's 2-3% target range.
Australia's A$2 trillion ($1.5 trillion) economy slipped into its first recession in three decades last year led by coronavirus-driven shutdowns but the country's success in curbing the pandemic allowed businesses to reopen earlier-than-expected.
Macroeconomic data on retail sales, employment, construction activity and consumer sentiment have surpassed expectations in recent months, supported by unprecedented level of monetary and fiscal stimulus.
The unemployment rate was still hovering near 6.5%, much higher than around 4% that the RBA considers full employment. Wage growth is at 1.4%, less than half the level the RBA thinks is needed to generate inflation.
Responding to questions from lawmakers, Lowe said the bank was committed to do "everything it reasonably can" to push the unemployment rate lower and drive wages growth higher.
However, even in its most optimistic scenario the RBA doesn't see inflation hitting its target band before the end of Lowe's term in 2023.
"The cash rate will be maintained at 10 basis points for as long as is necessary," Lowe repeated on Friday.
"Interest rates are going to be low for quite a while yet."
($1 = 1.3160 Australian dollars)
(Reporting by Swati Pandey; Editing by Leslie Adler and Sam Holmes)
