Australia's central bank doesn’t see the need for further policy easing as current stimulus packages were working as expected with economic recovery in progress in most of the country, as minutes of the August policy meetings released. At its August 4 meeting, the Reserve Bank of Australia (RBA) were holding its cash rate at a very low of 0.25% since March to cushion the economic blows from the pandemic.
The meeting members noted that the current downturn has not been as severe as earlier expectations as recovery is underway in most of the states and territories, although the recovery is most likely to be slower than earlier expectation, with the second outbreak in Victoria impacting further on the economy. The feeling of uncertainty about the health situation and economic future affecting the spending plans of many business and households.
Governor Philip Lowe showed the need for greater fiscal spending to revive the country’s weakened economy, mentioning that there are limits of what monetary policy can do. The meeting minutes showed that the members felt the need to require support for monetary and fiscal for some time as the glum labour market as the wage growth is at all-time low and unemployment rate reaching a 22-year high. Currently, an approximate of 30% of Australia’s population at working-age is on the government pandemic-related welfare payments.
As combined with other measures, the net of positive fiscal impact in Australian government finances is around 4% of the GDP in 2019/2020 and 5% in 2020/2021, the RBA data shows.
