Statement by Philip Lowe, Governor: Monetary Policy Decision

At today’s meeting, the Council decided to:

  • maintain the target for the spot interest rate at 10 basis points and the interest rate on the Exchange Settlement balances at zero percent
  • maintain 10 basis point target for April 2024 Australian government bond
  • continue to buy government paper at a rate of $4 billion per week until at least mid-February 2022.

Spot Rate Target Chart

Australia’s economic recovery

The Delta outbreak has interrupted the Australian economy’s recovery and GDP is expected to have fallen significantly in the September quarter. The outbreak affects many parts of the economy, but the impact is uneven, with some areas facing very difficult conditions, while others continue to grow strongly.

Impact of vaccinations and restrictions

This setback to Australia’s economic expansion is expected to be only temporary. As vaccination rates continue to rise and restrictions are eased, the economy is expected to recover. Many companies are now planning to relax restrictions and confidence has held up reasonably well.

However, there is uncertainty about the timing and pace of the recovery and it will likely be slower than earlier in the year. Much will depend on the nature and timing of the relaxation of restrictions on activities.

In our central scenario, the economy will grow again in the December quarter and is expected to return to pre-delta path in the second half of next year.

The restrictions on activity have had a significant impact on the labor market. The number of hours worked – currently the best indicator of labor market conditions – fell by almost 4 percent in August.

Looking ahead, the Bank’s business contacts and job openings data indicate that many companies are looking for employees ahead of the expected reopening in October and November.


Wage and price pressures remain subdued in Australia. Underlying inflation is around 1¾ percent and wages, measured by the wage price index, are rising by only 1.7 percent. While disruptions to global supply chains affect the prices of some goods, their impact on the overall inflation rate is limited

Housing markets

House prices continue to rise, although sales have declined in some markets due to the virus outbreak. Home loan growth has been driven by stronger demand for credit from both owner-occupiers and investors.

The Council of Financial Regulators discussed the medium-term risks to macroeconomic stability from rapid credit growth at a time of historically low interest rates. In this environment, it is important that lending standards are maintained and that loan-use buffers are appropriate.

Bond Yields

The bank’s policy package – including record low interest rates, bond purchase program, yield target and financing provided under the Term Funding Facility – provides substantial and ongoing support to the Australian economy.

Loan rates are at record lows, government bond yields are at a very low level and the exchange rate has depreciated in recent months. The fiscal responses from the Australian government and state and territory governments have also provided welcome assistance in supporting household and business balance sheets.

The Governing Council is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation in line with target. It will not raise the spot rate until actual inflation is lastingly within the target range of 2 to 3 percent.

The central scenario for the economy is that this condition is not met before 2024. To meet this condition, the labor market must be tight enough to generate wage growth materially higher than it is today.