SYDNEY, June 13 (Reuters) - The head of Australia’s central bank reiterated on Wednesday that any increase in the country’s official cash rates was still “some time away” as wage growth and consumer prices remain tepid.
The Reserve Bank of Australia (RBA) has held rates at a record low 1.50 percent since last easing in August 2016, making the current stretch of no change in policy the longest on record.
“At this stage, a sustained pick-up in inflation to around the midpoint of the target range is likely to require faster wages growth than we are currently experiencing,” Reserve Bank of Australia (RBA) Governor Philip Lowe said on Wednesday.
“This increase is likely to be only gradual,” he added.
“Given this, there is not a strong case for a near-term adjustment in monetary policy.”
Lowe said the RBA was paying close attention to household finances and consumption growth which has remained soft even as the country entered its 27th year of recession-free growth last quarter.
Australia’s A$1.8 trillion economy ($1.4 trillion) expanded at an annual 3.1 percent in the March quarter, the fastest pace in almost two years.
Still, household consumption growth has remained soft as debt-laden consumers battling tiny wage increases of around 2 percent hold back on everyday purchases.
The household debt-to-income ratio in Australia, at 190 percent, is the highest on record as all-time low interest rates have fuelled a debt binge in the property market.
Lowe was still confident of a pick-up in wage increases over time as more jobs are added and with some companies citing constraints in finding suitable workers.
“If this continues to be the case, it is likely that the next move in interest rates will be up, not down,” Lowe said.
“It is, however, important to remember that the environment in which interest rates are increasing is also likely to be one in which people’s incomes are growing more quickly than they are now. This will help.”
$1 = 1.3 Australian dollars Reporting by Swati Pandey; Editing by Richard Borsuk