SYDNEY — Despite the fastest interest-rate increase in history, Australia’s resource-rich economy still stands some chance of avoiding recession and achieving a soft landing, Reserve Bank of Australia Gov. Philip Lowe said Wednesday. In testimony before the Australian Senate, Lowe said while wage growth remains relatively subdued and inflation expectations stay anchored, an economic contraction might not come about in the future.
“If wage outcomes stay in a reasonable ballpark, then I think we can manage what I think is a fairly soft landing,” he said. The RBA expects wage growth to peak around 4.0% in the near-term, well below that of rates seen in other major economies. Still, risks to the economy include the possibility that employers will award wage increases that match the current 7.8% on-year pace of inflation, Lowe said. If that were to happen, it would trigger a damaging wage price spiral and lock in an even higher rate of inflation, he said. “At the moment, we don’t really see evidence of that occurring… but there are risks here,” he said. The RBA has raised the official cash rate by 325 basis points since May last year to combat the biggest surge in inflation in 32 years. Lowe described the current inflat …