RBA governor: Monetary stimulus is here to stay - MarketWatch

SYDNEY--Reserve Bank of Australia Gov. Philip Lowe on Tuesday rammed home the message to financial markets that the central bank will do whatever it takes to support the economy over the long-term, and that it is way too early to consider withdrawing policy stimulus.

In a speech to the National Press Club in Canberra, Mr. Lowe said it will take years to restore the economy to conditions that might require raising interest rates from their current record lows.

"It is going to be some years before the goals for inflation and unemployment are achieved. So it is premature to be considering withdrawal of the monetary stimulus," he said.

Mr. Lowe's comments comes a day after the RBA shocked some by announcing a further $100 billion Australian dollar (US$76.08 billion) quantitative easing program, which will commence when the current program expires in April. The announcement prompted immediate selling of the Australian dollar.

Recent signs of economic recovery in the job market and GDP growth had led some forecasters to predict the RBA would instead announce plans to taper its QE program.

But Mr. Lowe said the central bank's goals for inflation and employment growth are still a long way off from being met, adding that any hint of stimulus withdrawal would likely quickly convert into a higher Australian dollar.

"In terms of other central banks, most have recently announced extensions of their bond-purchase programs, many running until at least the end of this year. Given this, if we were to cease bond purchases in April, it is likely that there would be unwelcome upward pressure on the exchange rate," he said.

Still, the policy of ultra-low interest rates carries some risks.

Mr. Lowe said the RBA has its eye on rising house prices, saying some action will be required if prices continue to bubble upward and the move was associated with a deterioration in bank-lending standards.

"As housing prices rise again, we will be monitoring lending standards closely. We would be concerned if there were to be a deterioration in these standards, but there are few signs of this at the moment," Mr. Lowe said.

Write to James Glynn at james.glynn@wsj.com; @JamesGlynnWSJ

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