Dr Lowe said the extraordinary circumstances of the pandemic first hitting in 2020 had made it incredibly challenging to forecast the future of the economy.
“You’re faced with a global pandemic,” he said in response to a question from The Australian Financial Review.
“We were being told that it would take many, many years for vaccines to be developed, that people could be locked down for a long period of time.
“That tens of thousands of Australians will die in the pandemic and that our hospitals would be full.
I didn’t want to leave any stone unturned in that very difficult situation.
— Philip Lowe, RBA governor
“That we would have double-digit unemployment, perhaps 15 per cent.
“That there would be deep scarring for years, perhaps decades.
“That was the situation we were making decisions [on] in 2020.”
Dr Lowe said that in 2020, the RBA board had decided to do “everything it was possible to do to help the economy”.
“I didn’t want to leave any stone unturned in that very difficult situation.
“One of the things we could do is to say, be very clear about what we saw about the outlook for interest rates – that we would keep them low as long as necessary, and at the time we thought it would be necessary to keep them low out to 2024.”
Following Tuesday’s decision, money markets were pricing in a cash rate of 2.8 per cent by the end of this year and 3.6 per cent by June 2023, according to Westpac.
In November last year, Dr Lowe dismissed market pricing for a series of rate rises this year as a “complete overreaction” to inflation data.
In February, he conceded a rate rise later this year was “plausible”.
On Tuesday, Dr Lowe said the cash rate could hit about 2.5 per cent over the next couple of years, but said there was a “huge amount of uncertainty”.