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RBA governor upbeat about economy

Lilly Vitorovich
Reserve Bank of Australia governor Philip Lowe says a move in interest rates is still a while away

The next interest rate move is likely to be up, rather than down - but only if Australia's economy continues to improve, Reserve Bank of Australia governor Philip Lowe has told a business function.

But, any rate move is still a while away, he says, with the central bank waiting for jobs growth and a boost to wages and inflation.

The RBA last week kept the cash rate unchanged at 1.5 per cent for a 22nd consecutive month.

"Subsequent to the board meeting, the national accounts provided confirmation that the Australian economy is moving in the right direction.

"If this continues to be the case, it is likely that the next move in interest rates will be up, not down," Dr Lowe said in a speech to the Australian Industry Group in Melbourne on Wednesday.

The bank chief said, though, that any hike in rates would only come when personal income is rising more quickly than at present.

"Any increase in interest rates, however, still looks to be some time away.

"The board will want to have reasonable confidence that inflation is picking up to be consistent with the medium-term target and that slack in the labour market is lessening," he said.

A sustained pick-up in inflation to around the midpoint of the target range of two to three per cent is likely to require faster wages growth than at present, he said.