Australia's central bank kept rates at record lows on Tuesday and took an optimistic view on domestic activity ahead of data that is likely to show the economy grew more than 3 percent last quarter. In a widely expected decision, the Reserve Bank of Australia (RBA) held its cash rate at 1.50 percent, having last eased in August 2016 as policy makers await a revival in growth and inflation.
"The Australian economy is performing well," RBA governor Philip Lowe said in a statement, while predicting a further fall in unemployment. Yet as consumer prices remain subdued - a major reason for the RBA's steady stance in the past two years - policy makers have shown no urgency to tighten rates. Markets are not fully pricing in a rate rise until well into 2020. "Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual," Lowe said.
He repeated the outlook for household consumption was a "continuing source of uncertainty" as incomes remained weak while debt levels were high. Some economists suspect tepid wage growth of around 2 percent and cautious consumer spending will eventually hurt the economy. The GDP report is due on Wednesday and is forecast to show growth of 0.6 percent in the September quarter from the June quarter when the economy expanded 0.9 percent.
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