Australia’s second-largest pension fund said the nation’s borrowing costs could stay elevated until as late as 2025, arguing the global inflation struggle is far from over as job markets remain resilient.

Brian Parker, chief economist of Australian Retirement Trust, said in an interview that he “wouldn’t rule out” another hike to take the cash rate to 4.35%, adding that it was far too early to discuss policy easing. ART has more than A$240 billion ($153 billion) in assets under management.

“It’s going to take many, many months before the central banks can be confident that inflation is going to be decisively heading towards their targets and staying there,” Parker said on Thursday. “The big part of the reason for that is labor markets.”

Australia’s central bank is approaching the end of its tightening cycle after 12 rate increases to 4.1%, the highest level since April 2012. Policymakers have signaled a higher hurdle to further hikes, reflecting recent favorable data and a desire to engineer a soft landing.

Parker, who sees a 50-50 chance of recession in Australia, doesn’t expect an easing cycle to begin until late-2024 or even 2025. He sees the key rate settling as high as 3.5% — well above a pre-pandemic 10-year average of 2.6%.

“Is monetary policy acting as a drag on the economy? Is monetary policy on the tight side? Yes, it is,” he said. “So interest rates are higher than neutral, if I can put it that way. But longer-term they settle in something like a 3-3.5% range.”

Australia’s A$3.5 trillion pension industry has bought heavily into overseas markets as record inflows expand their investment footprint. Parker said equities still held some appeal, more so in Japan and Europe, while sovereign bonds are good value too.

“I’d much rather start an investment journey in bonds today than two years ago,” Parker said.

(Adds dollar figure for ART’s assets.)