Reserve Bank governor Philip Lowe is pushing back against expectations in financial markets that the official cash rate could be hiked late next year and again in 2023.
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"This is not an expectation we share," Dr Lowe bluntly told a conference in response to recent pricing action in global bond markets.
He reiterated that he does not expect to lift the cash rate from its record low 0.1 per cent until 2024 and when inflation is predicted to be sustainably within the two to three per cent target.
Wages growth also needs to materially higher - above three per cent rather than the record low 1.4 per cent where it stands now - but that would depend on the country being in full employment.
Dr Lowe told the Australian Financial Review Business Summit the recovery in employment has been "V-shaped" with a welcome decline in the jobless rate to 6.4 per cent.
"Job vacancies, job ads and hiring intentions remain strong," Dr Lowe said.
"This suggests that the unemployment rate will continue to trend lower, although this trend could be temporarily interrupted when JobKeeper comes to an end later this month."
He said the unemployment rate needed to be below five per cent to drive wages growth higher.
"How low below five is hard to tell and I certainly hope, and it's not inconceivable, we could sustain an unemployment rate in Australia starting with a three," he said in answer to a question.
New figures on Wednesday show job ads posted on seek.com.au rose by 4.1 per cent in February, to be 12.4 per cent higher than a year earlier, with ads in all states and territories rising for the first time since the beginning of the COVID-19 pandemic.
Improving prospects for the labour market, and the economy more generally, has helped to lift consumer confidence back to near a 10-year high set in December.
The Westpac-Melbourne Institute consumer sentiment index - a pointer to future household spending - rose 2.6 per cent in March.
"Australia's success in containing COVID-19, the promise of vaccine rollouts bringing an end to the pandemic, and support from stimulatory government policies have all contributed to the sustained lift," Westpac chief economist Bill Evans said.
Dr Lowe believes the economy is now in striking distance of its pre-pandemic levels after the growth results in the recent national accounts proved materially better than expected.
His comments came as the Organisation for Economic Co-operation and Development upgraded its growth forecast for Australia to a speedy 4.5 per cent in 2021, up from its previous forecast of 3.2 per cent made in December.
The RBA was predicting annual growth of 3.5 per cent by the end of 2021 when it updated its forecasts last month.
For 2022, the OECD kept its growth forecast at 3.1 per cent, but still comfortably above a long-term trend of 2.8 per cent.
Despite this upbeat backdrop, some businesses could be in for a tough time as support measures put in place by the federal government at the start of crisis unwind.
The February CreditorWatch business risk review showed there had been a 61 per cent jump in firms entering administration since January, having been in decline in the past 12 months.
"This is a sign of the commercial climate returning to more normal conditions," CreditorWatch chief executive Patrick Coghlan said.
"This figure is likely to rise again in the coming months, as JobKeeper ends and the three-month reprieve on credit arrangements for struggling smaller businesses comes to a close."
Australian Associated Press