The Reserve Bank has left the cash rate unchanged at its monthly board meeting, reiterating that it is unlikely to rise until 2024 at the earliest.
The cash rate remains at a record low 0.1 per cent, where it has stood since last November.
“The economic recovery in Australia is stronger than earlier expected and is forecast to continue,” Reserve Bank governor Philip Lowe said in a statement on Tuesday.
“An important ongoing source of uncertainty is the possibility of significant outbreaks of the virus, although this should diminish as more of the population is vaccinated.”
Dr Lowe noted that housing values have strengthened further, with prices rising in all major markets.
“Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers. There has also been increased borrowing by investors,” he said.
“Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
As previously flagged, the RBA will make decisions on its bond targeting regime and bond buying program aimed at keeping market interest rates low at its July meeting.
The governor stuck to the line of previous statements that the board is unlikely to raise the cash rate until 2024 at the earliest.
“It will not increase the cash rate until actual inflation is sustainably within the 2-3 per cent target range,” he said.
“For this to occur, the labour market will need to be tight enough to generate wages growth that is materially higher than it is currently.”