At its meeting today, thesettings, including the targets of 10 basis points for the cash rate, the yield on the 3-year Australian Government bond, and the parameters of the Term Funding Facility and the government bond purchase program.
Outlook for Global Economy
The outlook for the global economy has improved over recent months due to the ongoing. While the path ahead will likely remain bumpy and uneven, there are better prospects for a sustained recovery than a few months ago.
Global trade has picked up, and commodity global developments, there have been similar movements in Australian bond markets. Changes in bond yields globally have been associated with volatility in other asset prices, including foreign exchange rates. The Australian dollar has remained at the upper in recent years.. The recovery rdependson the . Inflation remains low and below targets. The positive news on vaccines and the prospect of further important fiscal stimulus in the have seen longer-term bond yields increase considerably over the past month. This increase partly reflects a lift in expected inflation over the medium term to closer to central banks’ targets. Reflecting these
Australian Economic Recovery
In Australia, theis well underway and has been stronger than expected. There has been substantial growth in employment and a welcome decline in the to 6.4 percent. Retail spending has been strong, and most households and businesses that had repayments have now recommenced repayments. The recovery is expected to continue, with the central scenario being for GDP to grow by 3½ percent between 2021 and 2022. GDP is expected to return to its end-2019 level by the middle of this .
Wage and Price Pressures
Wage andto remain so for some years. The economy is still operating with considerable spare capacity, and the unemployment . Further progress in reducing excess capacity is expected. Still, it will be some is tight enough to generate wage increases consistent with achieving the inflation target.
In the central scenario, the unemployment rate will still be around 6 percent at the end of thisand 5½ percent in 2022. In underlying terms, inflation is expected to be 1¼ percent in 2021 and 1½ percent in 2022. CPI inflation is expected to rise temporarily because of the reductions. The current monetary policy settings continue to help the economy by keeping financing costs very low, contributing to a lower exchange rate than otherwise, and supporting the supply of balance sheets.