The Reserve Bank of Australia (RBA) has maintained the cash rate at its historic low of 0.1% for the ninth consecutive month.
CreditorWatch chief economist Harley Dale said the seemingly "endless lockdowns" are likely to prevent the RBA from making any changes to the cash rate in the near future.
Mr Dale said the business uncertainty brought about by the duration of the lockdown would be the "biggest enemy" for the remainder of the year.
"Complementary RBA policies to maintain downward pressure on borrowing costs will also persist,” Mr Dale said.
“This is vital to businesses, especially small and medium-sized enterprises (SMEs) which are disproportionately affected by the current economic conditions.”
However, he pointed out that at some point, economic conditions would turn ripe for a strong recovery.
"Businesses across all industries will need a strategy to leverage the opportunities that will present themselves.
“That seems a long way off right now but it will happen and businesses will do well to be prepared.”
Impact on housing market
In a recent interview with Livewire, Credit Suisse portfolio manager and director Jasmin Argyrou said the low-rate environment has pushed up demand for loans from both owner-occupiers and investors.
"Whether you look at the level of new lending or the growth rates, and regardless of whether you look at it from year on year or a six-month period, it is a frenzied market. And demand has exploded," Ms Argyrou said.
The growth in lending forms a two-speed economy along with the gains in house prices.
Ms Argyrou said house prices will likely continue to soar, with gains only being interrupted by the lockdowns.
"They've had the effect of pressing pause on demand for housing and on the house price appreciation trend, but I don't think they've reversed it. And I don't think that'll stop it," she said.
RBA Governor Philip Lowe acknowledged the continued growth in house prices and financing demand from owner-occupiers and investors.
"Given the environment of rising housing prices and low interest rates, the Bank is monitoring trends in housing borrowing carefully and it is important that lending standards are maintained," he said.
Economic recovery interrupted by Delta
Mr Lowe said the Australian economy had a considerable momentum prior to the Delta outbreak, with the gross domestic product growing by 0.7% in the June quarter and by nearly 10% over the year.
"GDP is expected to decline materially in the September quarter and the unemployment rate will move higher over coming months," he said.
"While the outbreak is affecting most parts of the economy, the impact is uneven, with some areas facing very difficult conditions while others are continuing to grow strongly."
Mr Lowe said this setback is expected to be temporary. However, he acknowledged that there is still uncertainty when it comes to the timing of the bounce-back.
"Much will depend on the health situation and the easing of restrictions on activity. In our central scenario, the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year," he said.
With this, Mr Lowe said the RBA Board is likely to maintain the cash rate until the targets on employment and labour are reached.
"The central scenario for the economy is that this condition will not be met before 2024. Meeting this condition will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently," he said.