Australia's economy is on track for lower rates of unemployment and stronger growth as it exits a period dominated by a mining investment boom and bust, according to central bank chief Philip Lowe.
In a speech titled "The Next Chapter," the Reserve Bank of Australia governor said the bank's optimistic forecasts for both inflation and gross domestic product growth in 2018 look to be achievable.
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"As things currently stand, we look to be on course to make further progress in reducing unemployment and moving towards the midpoint of the [2-3%] medium-term inflation target," Mr. Lowe said.
Still, some caution will need to exhibited by the RBA as soaring household debt levels will require policy makers to act carefully, he said.
"Higher levels of debt also mean that household spending could be quite sensitive to increases in interest rates, something the Reserve Bank will be paying close attention to," he said. He added that households had been coping reasonably well with higher debt levels so far.
With GDP expected to grow 3.0% on year in 2018, unemployment should fall and wages should rise faster, he added.
Australia's job market has been a bright spot for the economy with more than 250,000 jobs created in the last six months, three quarters of them full-time positions. The jobs growth is occurring across the country, the RBA said.
The bank said Tuesday in minutes of its Sept. 5 policy meeting that the breadth of the jobs growth is a sign that the economy has moved beyond any distortions caused by swings in the mining sector.
"We expect to see a gradual decline in the unemployment rate. This should lead to some pickup in wage growth, although we expect this to be a gradual process," Mr. Lowe added.
The governor also noted rising business investment and the return of "animal spirits" after a long absence, with conditions for business at decade highs.
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(END) Dow Jones Newswires
September 21, 2017 01:36 ET (05:36 GMT)