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RBA Lowers Unemployment Forecast

Australia's unemployment rate is expected to drop more than previously projected, the Reserve Bank of Australia said in its Statement on Monetary Policy, released Friday.

The unemployment rate is forecast to fall to 5.25 percent for the year ending June 2018, instead of 5.5 percent estimated three months ago. The rate is expected to remain at 5.25 percent until June 2020.

At the same time, estimates for economic growth and inflation were broadly unchanged from the November statement.

GDP is forecast to expand 3.25 percent each in the year ending December 2018 and 2019. Inflation is seen at 2 percent in June 2018, before easing slightly to 2.25 percent.

"It will be some time, however, before the economy reaches current estimates of full employment and inflation returns to the midpoint of the target," RBA said.

The bank observed that a key source of uncertainty for the forecasts continues to be the outlook for the labor market.

RBA said it is not clear how much spare capacity there is in the labor market and also it is unclear how much any decline in spare capacity will translate into building wage pressures.

RBA Chief Philip Lowe said Thursday that there is no strong case for a near-term policy adjustment.

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