Australian interest rates will remain at record lows for another year - IMF

Australian interest rates could remain at their record lows for up to a year more, the International Monetary Fund said on Monday.

Australia continued its recovery and transition from the mining boom over the last twelve months, with conditions in place for a modest pick-up in economic growth above-trend rates, and slow rises in inflation and wages, the IMF said.

But with stronger momentum in domestic demand and inflation being close to the midpoint of the target range, continued macroeconomic policy support is an "essential" ingredient.

Meetings between the Reserve Bank of Australia (RBA), the Treasury and the IMF confirmed that the nation is relying on the low interest rates and loose budget settings to support economic growth, inflation and employment.

"Securing the return to full employment and inflation objectives durably will require continued macroeconomic policy support," the IMF said.

As uncertainty surrounding the question of whether or not inflation and wages would rise when full employment was reached in Australia, Thomas Helbling, the leader of the IMF consultations, told reporters "it's possible" that interest rates, on hold since August 2016, could remain paused throughout 2018.

With data suggesting that there had been little or no inflation or wage pressure in Australia, forecasts seemed to suggest that further delays to the increase of interest rates would put the country behind global growth rates, possibly eroding support for the Australian dollar in the process.

"What you really want at this point is to be sure that you have strong domestic demand momentum, and more momentum in inflation and prices than their currently is," said Helbling.

"And it may well take a year," he added.