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RBA says economy will rebound out of lockdowns, plays down rate risks

“While the increase won’t be as large as that of last year, it will mean that many people have more money in the bank than they did pre-Delta.”

The Australian Bureau of Statistics will this week release the August jobs report, with analysts expecting an increase in the unemployment rate from the current 4.6 per cent.

Dr Lowe said the bank believed hours worked were likely to fall by between 3 and 4 per cent in the September quarter, with the jobless rate tipped to reach the “high fives” for a short period of time.

He said many small and medium-sized businesses were facing difficult conditions, noting some were in a “wait, survive and see” mode due to large falls in revenue.

“Government assistance is helping, but the longer they have to wait before reopening, the more difficult things will become and the greater the potential damage to this important part of the economy. For some businesses, there is a limit to how long they can wait. So the sooner we can open safely the better,” he said.

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The bank has been clear in saying it does not believe it will lift the cash rate, currently at 0.1 per cent, until 2024. But financial markets are pricing in a rate rise by the end of next year.

Dr Lowe said given such stagnant wages growth, it was unclear why markets believed the RBA would move on rates any time soon.

“These expectations are difficult to reconcile with the picture I just outlined and I find it difficult to understand why rate rises are being priced in next year or early 2023,” he said. “While policy rates might be increased in other countries over this timeframe, our wage and inflation experience is quite different.”

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