Low rates ‘working’

INTEREST rates need to be set at expansionary levels to help the economy absorb spare capacity in the labour market, a process that can take several years, RBA assistant governor Luci Ellis said.

Dr Ellis said a falling unemployment rate was a sign low rates were working to drive growth above trend.

“It can take a while for spare capacity to be absorbed,” said Elli. “Therefore policy settings might need to be expansionary for a number of years.”

Rates have been at a record low of 1.5 per cent since mid-2016.