The Reserve Bank of Australia says a double dip recession cannot be ruled out if lockdowns persist beyond the September quarter.
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Fronting an economics committee on Friday while holding a coffee mug saying "half full", RBA governor Philip Lowe said the economy's ability to bounce back from the Delta outbreak would hinge on the speed of the vaccine rollout and how many people were vaccinated.
"I am optimistic about next year [but] we have got to traverse a few very difficult months," Dr Lowe said.
The head of the RBA said it was unlikely the economy would record two consecutive quarters of negative growth to thrust it into a recession, but the emergence of a potential vaccine-resistant strain of COVID-19 could hinder the recovery.
"We can't rule out two quarters of negative GDP if the health situation deteriorates but I think it is unlikely at this stage," Dr Lowe said.
"If we were to see a new strain of the virus, particularly if it was vaccine-resistant, I think we would be in a whole different world but certainly that is not the central scenario."
The appearance by the central bank to the committee chaired by Liberal MP Tim Wilson coincided with the RBA tapering its GDP growth forecasts for the December quarter from 4.75 to 4 per cent.
The RBA is expecting negative growth in the September quarter.
Despite Dr Lowe remaining upbeat about the longer-term recovery, he noted short-term uncertainties from lockdowns plaguing the three major cities were putting significant pressure on small businesses.
NAB executive Michael Saadie said the bank was receiving a large number of calls from businesses seeking hardship support, with the majority coming from customers in NSW.
"I am quite surprised by the level of support a lot of our customers are asking us for at this stage," Mr Saadie said.
NAB's anecdotal rise coincides with figures released by the Australian Banking Association which showed 15,000 home and business loans had deferred repayments because of lockdowns beginning in June.
Mr Saadie also noted vaccinations were the only solution to the stopping extended lockdown periods which were disrupting business trading.
This is a similar view to the RBA, which flagged household consumption typically drops by 15 per cent when lockdown measures were invoked.
RBA assistant governor Luci Ellis said central forecasts were based on most of the country receiving at least one shot of a vaccine by the end of the year, which would prevent extended lockdowns.
When asked about Australia's subdued wage growth, Dr Lowe said wages would not rise to their desired target band of above 3 per cent until unemployment falls.
The cash rate is also expected to remain at 0.1 per cent until at least 2024 when inflation is forecast to hit its target range of 2 to 3 per cent.
"We want to see results in inflation before we move, not a forecast in the target," Dr Lowe said.
"If we can get the unemployment rate down into the low-fours, firms will have to compete more for workers and that will involve higher wage rises."