The Reserve Bank has been gradually peeling back the suite of support measures it put in place during the pandemic as the economy progressively recovers from its deep 2020 recession.
But so far RBA governor Philip Lowe has been adamant the cash rate won't rise for some time yet and has repeatedly told financial markets - who are betting on a rate rise this year - to be patient.
He wants to see inflation sustainably within the RBA's two-three per cent target band before lifting the cash rate from a record low 0.1 per cent, which will need the jobless rate to be around four per cent and wages growth to accelerate.
However progress is being made on these targets with unemployment falling to 4.2 per cent in December, well ahead of what the RBA was expecting.
Next week's December quarter inflation figures could see the underlying measure hitting 2.5 per cent for the first time in seven and a half years, up from 2.1 per cent in the September quarter.
Inflation is on the climb globally, fuelled by rising oil prices and due to supply chain distortions caused by the pandemic.
"It is clear underlying inflation by the time we get to the March and June quarters will probably be really close to three per cent," says Market Economics managing director Stephen Koukoulas.
"You just want to make sure it doesn't go to four or five (per cent)."
He believes the RBA should at least flag the idea of rate hikes and then start moving some time soon against the backdrop of interest rates rising globally.
Westpac chief economist Bill Evans expects the first hike will be in August, lifting the cash rate to 0.25 per cent from 0.1 per cent.
Should home buyers be worried? According to the federal government households are well ahead with their home loan payments, accumulating some $48 billion in offset mortgage accounts during the pandemic.
So possibly not at this stage.
The cash rate aside, Dr Lowe and his board have to make a crucial decision on whether to continue with one of its non-traditional forms of monetary policy - its bond buying program.
The program, otherwise known as quantatitive easing or QE, was introduced in November 2020 and aims to keep market interest rates and borrowing costs low.
The RBA believes it has also kept the Australian dollar lower than otherwise would have been the case and in turn kept Australia more competitive internationally.
The US and other countries first undertook QE measures during the 2008-2009 global financial crisis when their interest rates were close to zero.
The US Federal Reserve is expected to end its QE program in March and start lifting its key fed funds rate shortly after that, putting pressure on the rest of the world to follow suit.
For Australia, QE is now the last policy still standing - outside of the cash rate - in what has been a varied set of measures undertaken at a time when interest rates were already ultra low heading into the COVID-19 crisis.
When coronavirus struck in early of 2020, the cash rate was already a slim 0.75 per cent.
In comparison, when the 2008-2009 global financial crisis started sweeping the world the rate was a relatively hefty 7.25 per cent - providing plenty of economic stimulus when it was slashed to three per cent in a matter of months.
RBA assistant governor Christopher Kent told a conference early in the pandemic the tools the central bank had introduced gave a greater control over a wider range of rates than previously.
But he admitted monetary policy had become "more complex" rather than just looking at the cash rate and coming to a view on its likely path.
The central bank's term funding facility, or TFF, which provided banks and other lenders with cheap funding to pass on to their clients, ended in June last year.
Its three-year bond yield target, which also aimed to keep market interest rates in line with the cash rate and in turn fixed-rate loans low, was discontinued in November.
Now the RBA will decide at its first board meeting of the year on February 1 whether to extend or finish its bond buying program.
At the moment it is buying $4 billion worth of government bonds in the open market each week.
In a speech in December, Dr Lowe set out the three options for the board to consider in February:
* reduce purchases with an expectation to terminate the program in May
* reduce purchases and review again in May
* cease purchases altogether in February.
Most economists appear to be leaning towards the latter given the upbeat appraisal Dr Lowe was already giving for the outlook late last year backed by strong RBA forecasts.
However there is some uncertainty given the impact the highly infectious Omicron variant has had on confidence so far this year.
"The RBA will have to think there is a material risk Omicron will have a sustained negative impact on the economy for it to decide to continue QE," ANZ head of Australian economics David Plank says.
"We doubt the RBA will reach such a conclusion. We think the RBA will see Omicron as only having a temporary impact on the economy."
Australian Associated Press