RBA Minutes: Sees lowering unemployment as national priority

The Reserve Bank of Australia has published the minutes of the December policy meeting.

Minutes showed that its Board feared a protracted period of unemployment lay ahead and rectifying that would be a "national priority."

Key notes

Australia's labour market is recovering faster than expected thanks to an easing in coronavirus restrictions and a rebound in consumer spending, but it will still take years for unemployment to fall to desired levels, says the country's central bank.

The Board agreed "substantial" monetary and fiscal support would be needed for a considerable period and remained ready to add more stimulus if needed.

It reiterated a commitment to keep rates at 0.1% for at least three years and to not tighten until inflation was sustainably back in a 2-3% target range.

Prepared to do more if needed, focus on the bond-buying program.

Will review size of program at future meetings and its effect on economy.

Substantial policy support will be needed for a considerable period.

RBA does not expect to raise the cash rate for at least three years.

 Will not raise rates until inflation sustainably in 2-3% target band.

Ready to buy bonds in whatever amount needed to maintain 3-year yield target.

Latest policy easing had kept a$ lower than otherwise would be.

 Recovery in labour market more advanced than expected, still much spare capacity.

"Substantial tightening" in the labour market needed to lift wage growth, inflation.

Extended period of high unemployment in prospect, national priority to address it.

National house prices up "only a little" since start of pandemic, slow population growth a restraint.

Slump n migration put downward pressure on rents, vacancy rates high.

China restrictions on Australia imports had some effect, but demand for iron ore still firm.

Delivery of vaccines in u.s, Europe would reduce downside risks for global growth.

More from the RBA to come

''The Bank will remain in "watch–and–wait" mode after delivering November’s stimulus,'' analysts at Westpac explained. 

Following these minutes today, the RBA’s Kearns, who is the Head of Financial Stability, will speak at the Australasian Finance and Banking Conference.

Meanwhile, AUD/USD reached a high of 0.7578 for a fresh 2 ½ year high in London.

Description of the minutes

The minutes of the Reserve Bank of Australia meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee. Generally speaking, if the RBA is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the AUD.