Australia Monetary Policy November 2021


Australia: RBA tightens its stance in November

November 2, 2021

At its monetary policy meeting on 2 November, the Reserve Bank of Australia (RBA) decided to abandon its 0.10% target for three-year government bond yields, amid faster-than-anticipated progress towards the inflation target. That said, the Bank kept the cash rate unchanged at the all-time low of 0.10%, and stated it will continue purchasing government bonds at the rate of AUD 4 billion a week until at least mid-February next year, in order to maintain accommodative financing conditions.

The decision was underpinned by recent inflation data, as well as the ongoing economic recovery amid an increasing vaccination rate and looser restrictions. In Q3, underlying inflation came in at 2.1%, while the headline reading reported a 3.0% year-on-year increase in prices, driven by elevated energy and housing costs. The Bank expects underlying inflation of around 2.3% this year and next, while it sees GDP expanding 3.0% and 5.5% in 2021 and 2022 respectively, although much depends on the evolution of the health crisis.

The Bank maintained a dovish tone in its communiqué, stating that it is “committed to maintaining highly supportive monetary conditions to achieve a return to full employment”. Moreover, it reiterated that it will not raise the cash rate before inflation is sustainably within the 2.0%–3.0% target range, which it does not expect to happen before 2023. As such, all of our panelists see the cash rate remaining at 0.10% for the whole of next year.

The next monetary policy meeting is scheduled for 7 December.

FocusEconomics panelists forecast the cash rate to end 2022 at 0.10% and 2023 at 0.35%.

Author: Massimo Bassetti, Senior Economist

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Australia Monetary Policy Chart

Australia Monetary Policy November 2021

Note: RBA Cash Rate in %.
Source: Reserve Bank of Australia (RBA).

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