SYDNEY: Australia's labour market is recovering faster than expected thanks to an easing in coronavirus restrictions and a rebound in consumer spending, but it will still take years for unemployment to fall to desired levels, says the country's central bank.
Minutes of the Reserve Bank of Australia's (RBA) December policy meeting showed its Board feared a protracted period of unemployment lay ahead and rectifying that would be a "national priority."
As a result, the Board agreed "substantial" monetary and fiscal support would be needed for a considerable period and remained ready to add more stimulus if needed.
It reiterated a commitment to keep rates at 0.1% for at least three years and to not tighten until inflation was sustainably back in a 2-3% target range.
Having ruled out a move to negative interest rates, any further easing would come through an expansion of the RBA's bond buying program, which currently had a target of A$100 billion.
"Members agreed to keep the size of the bond purchase program under review," the minutes showed.
Some analysts suspect the bank will have to increase the program by another A$100 billion, if only to lessen upward pressure on the local dollar.
The currency has surged higher on a weak US dollar in recent weeks to highs not seen since 2018, helped in part by strength in prices for key commodity exports including iron ore.
The Board noted Chinese demand for Australian iron ore had remained firm even as Beijing slapped bans and tariffs on other imports, including wine and coal.
Domestically, the economy had bounced back strongly in the third quarter, after a record tumble in the second, and further growth was expected in the current quarter.
Consumer spending had jumped as success in containing COVID-19 allowed the national economy to open up, and a high household savings rate provided more spending power going forward.
Record-low mortgage rates had revived the housing market more quickly than expected, though the Board noted house prices had increased only a little since the start of the pandemic.