By Swati Pandey
SYDNEY, Sept 5 (Reuters) - The Reserve Bank of Australia (RBA) has been seeking to balance the benefits of stimulatory monetary policy with the risks of high and rising household debt when keeping interest rates at record lows, Governor Philip Lowe said on Tuesday.
The RBA held official rates at 1.50 percent at its monthly policy meeting on Tuesday for the thirteenth straight month as it balances tepid inflation against rising private debt. will be some time before we are at what could be considered full employment in Australia and before underlying inflation is at the mid-point of the medium-term target range," Lowe said at a board dinner in Brisbane.
"This means that stimulatory monetary policy continues to be appropriate."
Australia has seen a revival in full-time jobs since the beginning of this year after a fall in 2016. But policymakers continue to fret over high spare capacity and its impact on wages growth which is loitering at a record low of 1.90 percent.
That has put downward pressure on inflation which remains below the RBA's 2 percent to 3 percent target band.
"The Board has been conscious that attempting to achieve faster progress on unemployment and inflation through yet lower interest rates would have added to the risks in household balance sheets," Lowe said.
Household debt has skyrocketed to 190 percent of disposable income. And, at 6.5 percent borrowing is accelerating at almost twice the rate at which household income is increasing.
"Lower rates would have encouraged faster growth in household borrowing and added to the medium-term risks facing the economy. Our judgement has been that it was not in the public interest to encourage an already highly indebted household sector to borrow even more," he said.
"So the Board has been prepared to be patient and has not sought to overly engineer or fine-tune things."
Lowe also reiterated aloud the need for a lower exchange rate. The Australian dollar AUD=D4 climbed to a 2-year peak of $0.8066 in late July. It last held at $0.7970.
The RBA has said a higher exchange rate would hurt Australia's export-driven economy.