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Neutral interest rate may rise to 1% by 2050

As in other advanced economies, Australia’s neutral rate of interest rate will probably edge up a bit over the coming decades. That will result in higher borrowing costs, but Australia’s low public debt levels mean that the government will be able to cope. And even though interest rates could approach the zero-lower bound yet again during the next major downturn, macroprudential policies will likely prevent major financial stability risks from emerging as investors hunt for yields.

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