Reserve Bank governor Philip Lowe has re-affirmed that the official interest rate will remain at near zero for at least another three years.

This is despite unveiling a sharply upgraded economic outlook which included a forecast that unemployment would drop to 5% by the end of this year and to 4.5% by December 2022.

At its board meeting this week, the RBA again elected to keep the official cash rate steady at 0.1%, where it has sat since November 2020. In a statement following the meeting, Lowe says “the economic recovery in Australia has been stronger than expected and is forecast to continue”.

Lowe says the bank’s economists have pencilled in further upward revisions to growth, with real GDP now predicted to lift 4.75% over 2021, versus 3.5% previously, while forecast growth in 2022 is steady, also at 3.5%.

But the labour market recovery will not spark much in the way of inflation, which Lowe says will now be 2% by the middle of 2023, versus a previous estimate of 1.75%.