There is “virtually no doubt” interest rates should remain at the historically low rate of 0.1 per cent, according to the Shadow RBA at The Australian National University (ANU).

The call comes despite the economy improving and Australia’s management of the COVID-19 pandemic.

The RBA Shadow Board says Australia’s improved economic indicators include a drop in official unemployment from 6.4 per cent to 58 per cent between January and February.

The Shadow Board attaches a 99 per cent probability that rates should remain steady and a mere one per cent probability that an increase is appropriate.

Shadow RBA Chair, Dr Timo Henckel, says Australia’s “headline labour market statistics continue to improve”.

“The official ABS unemployment rate fell significantly from 6.4 per cent in January to 5.8 per cent in February,” he said.

“In the same period, total employment increased by 88,700, almost all attributable to a change in full-time employment.

“Youth unemployment fell a full percentage point, to 12.9 per cent. Job advertisements ticked up while the labour force participation rate remained steady at 66.1 per cent.”

Changes to JobKeeper could see a rise in unemployment, Dr Henckel warned.

“JobKeeper assistance terminated at the end of March; without this assistance and the economy remaining weak in some sectors, especially the entertainment, hospitality and tourism industries, unemployment is likely to rise again during the next few months,” he said.

Looking ahead six months, the Shadow Board attaches a 78 per cent interest rates should remain at 0.1 per cent, with the probability of an interest rate decrease falling from two to one per cent.

Read the full commentary online.

Top image: Ayush Jain/Unsplash

Featured experts

You may also like

Article Card Image

Democracy Sausage: Australia’s big chance with Jim Chalmers

Treasurer of Australia Jim Chalmers joins Mark Kenny and Marija Taflaga to discuss the future of Australia’s economy and society.

Article Card Image

Why caring can counter quitting in a post-pandemic world

For managers keen to get the most out of their staff, it's time to let go of control and embrace care.

Article Card Image

What are the odds? From coin tosses to card shuffles

When it comes to the probability of coin tosses, card shuffles and even voting, your best bet is to trust maths rather than your gut.

Subscribe to ANU Reporter

Anu Logo

+61 2 6125 5111

The Australian National University, Canberra

CRICOS Provider: 00120C

ABN: 52 234 063 906

EDX Logo
Group of eight Australia Logo