An expected decision made by Australia’s central bank when it holds the rate at the all-time low on Tuesday, July 7, to help to support the economic recovery by maintaining the accommodative approach for the required time. The Reserve Bank of Australia (RBA) rates position is at 0.25% on its monthly policy meeting and sounded cautiously optimistic about economy reopening that will be carried out earlier than previous expectations after the country’s authorities had managed to curb most of the coronavirus spread.
Governor Philip Lowe stated after meeting that the country’s A$2 trillion (US$1.4 trillion) is in the middle of the highest contraction since the 1930s But the governor said that the condition has stabilized and the impact has been less extreme than previous projections. Even though the declining total hours worked in Australia still lingering, the percentages were considerably smaller than the previous projection and April percentages. The retail spending also reportedly has been increased as the new infection count has dropped significantly and the movement restriction easing in most parts of the country.
The optimistic voice comes from the significant drop of new infections, the movement restriction easing earlier than expectation, numerous job vacancies, and increasing retail spending. On the other hand, the New South Wales-Victorian state border closure along with the spike on the number of cases in Melbourne recently brings doubt over the recoveries.
The RBA did not mention the cases spike on the statement, said that the speed of economic recovery and its nature until now remains “highly uncertain”, thus the monetary and fiscal support will be needed for some time. The central bank said that they plan to scale up the programme of government bond-buying if the monetary stimulus is needed while restating the fiscal response importance.
The Australian government will announce a statement on “mini-budget” scheduled at July 23 to give detailed plans for fiscal stimulus measures. The governor and RBA board will keep an eye the announcement, and it will be unsurprising if the Governor privately urging the government to maintain the level of support or at the minimum rate, phasing out the measures gradually, said an investment strategics from Sydney, Stephen Miller.
