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Australia’s central bank governor defends low policy rates, says won’t move in lock step


People walk past the Reserve Bank of Australia building in the central business district of Sydney on July 4, 2017.

Saeed Khan | AFP | Getty Images

People walk past the Reserve Bank of Australia building in the central business district of Sydney on July 4, 2017.

The Reserve Bank of Australia (RBA) welcomes a recent pick up in the labor market, although subdued wages and high household debt means policy rates will stay lower for longer, Governor Philip Lowe said on Wednesday.

Australia’s labour market strengthened for a fourth month in June led by a remarkable comeback in full-time jobs while the unemployment rate steadied at 5.6 percent.

Other indicators of the economy’s health have also been generally positive, with a measure of business conditions jumping in the June quarter to its highest level since early 2008.

Wage growth at 1.9 percent, however, is crawling at the slowest pace ever and the underemployment rate, which measures people wanting to work more hours, is near record highs.

That is putting downward pressure on inflation which remains below the RBA’s 2-3 percent target band. Data out on Wednesday showed consumer prices were surprisingly soft last quarter with underlying inflation at 1.8 percent.

“We have not sought to stimulate a rapid lift in inflation,” Lowe said at a lunch in Sydney.

“The fact that the labor market has been generating sufficient jobs to keep the unemployment rate broadly steady has allowed us to be patient.”

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