on air now

RBA refuses to lower inflation target as interest rate cut looks likely

Reserve Bank Governor Philip Lowe has said he will not lower their inflation target and indicated interest rates could be cut further.

Mr Lowe maintains if the current interest rate cuts, and recent tax relief for millions of low and middle-income earners, fails to stimulate the market the Reserve Bank of Australia is prepared to lower the official cash rate.

He has also said Australians should expect “an extended period of low interest rates”.

AMP Capital Chief Economist Shane Oliver tells John Stanley he agrees with the RBA keeping their inflation target at 2 to 3 per cent.

“The problem with changing the target to 1 to 2 per cent is that the Reserve Bank can then give up and say, ‘well we’ve met our objective’.

“I think that would be a real problem. It would question the credibility of having the inflation target in the first place and more importantly, it would lock in low wages growth for a lengthy period.

Click PLAY to hear the full interview