(Corrects para 7 to show 10-year bond futures are implying a yield of 1.718%, not 0.718)
By Swati Pandey
SYDNEY, March 10 (Reuters) - Australia's central bank chief on Wednesday rebuffed market talk of rate hikes, saying it will take at least until 2024 to reach full employment even as the economy was now within "striking distance" of its pre-pandemic output.
Australia's A$2 trillion ($1.5 trillion) economy expanded by a larger-than-expected 3.1% in the December quarter, clocking its fastest ever back-to-back quarterly rises. Job growth has been sturdy while retail sales are going strong too.
"These better-than-expected outcomes are very welcome news," the Reserve Bank of Australia's (RBA) governor, Philip Lowe, said in a speech in Sydney.
"However, they do not negate the fact that there is still a long way to go and that the Australian economy is operating well short of full capacity."
The remarks come as financial markets begin pricing in rate hikes on the back of strong economic data and optimism about successful coronavirus vaccine rollouts.
Lowe noted the recent surge in Australian bond yields that were boosted by expectations of possible increases in the cash rate as early as late next year, saying, "this is not an expectation that we share."
In response, the Australian dollar AUD=D3 slipped to a low of $0.7704 from $0.7718. Ten-year bond futures YTCc1 rose 5.5 ticks, implying a yield of 1.718% from as high as 1.955% in February.
Lowe reiterated the RBA was committed to maintaining "stimulatory monetary conditions" for as long as necessary.
Core inflation, at 1.25%, was expected to stay below the RBA's 2-3% target range for at least the next two years, he said, adding the board would leave the cash rate at 0.1% until actual inflation was sustainably within its target range.
Lowe added that returning Australia's economy to full employment was also a "high priority." He said it was unlikely that wage growth would pick up considerably to lift inflation within the RBA's target range before 2024.
"This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024," he said. ($1 = 1.2962 Australian dollars)