The Reserve Bank of Australia has left the cash rate unchanged at a record low 0.1 per cent at its final board meeting of the year.
RBA governor Philip Lowe said the Australian economy is recovering from the setback caused by the Delta variant of the coronavirus and expects growth to return to its pre-Delta path in the first half of 2022.
He also said leading indicators are pointing to a strong recovery in the labour market, and while inflation has increased, in underlying term it remains low at 2.1 per cent.
“The board is committed to maintaining highly supportive monetary conditions to achieve its objectives of a return to full employment in Australia and inflation consistent with the target,” Dr Lowe said in a statement on Tuesday.
He said the board will not increase the cash rate until actual inflation is sustainably within the two to three per cent target range.
“This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently,” he said.
“This is likely to take some time and the board is prepared to be patient.”
The board will reconvene in February.