RBA: Economy almost at full capacity

Australian economic growth is almost at its limit, the Reserve Bank (RBA) has warned.

This week, the central bank kept the official cash rate on hold at 4.5 per cent to the surprise of many economic analysts.

However, RBA deputy governor Ric Battellino has suggested that higher interest rates will be needed "at some point" to keep inflation within limits and stop the economy from overheating.

Speaking at the Property Council of Australia's Queensland Downtown Luncheon, he said: "The economy has been growing continuously for almost 20 years and is therefore approaching full capacity.

"The resources boom that began about 2005, and which abated for a time during the global financial crisis, is reemerging, adding to the pressure on capacity."

Announcing the rate decision on Tuesday (October 5th), RBA governor Glenn Stevens confirmed the likelihood of future rises.

Mr Stevens said he expected inflation to remain within the RBA's target band of two to three per cent over the near term.

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