Powered by MOMENTUM MEDIA
subscribe to our newsletter

RBA optimistic amid early COVID relief

The economic downturn may be “shallower” than initially expected, with policymakers easing lockdown measures earlier than anticipated, according to the Reserve Bank.

The Reserve Bank of Australia (RBA) has released minutes from its monetary policy board meeting earlier this month, in which it held the official cash rate at a record low of 0.25 per cent.

The central bank acknowledged the severity of the challenge facing the Australian economy, which it said has slipped into the deepest downturn in almost 90 years.

“Members recognised that the Australian economy was experiencing the biggest economic contraction since the 1930s,” the RBA stated.

“A very large number of people had lost their jobs or were working zero hours, household spending had weakened considerably, and some investment was being deferred or had been cancelled.”

Advertisement
Advertisement

But, according to the central bank, the light at the end of the tunnel may be closer than initially anticipated.   

“Notwithstanding these developments, it was possible that the downturn would be shallower than earlier expected,” the RBA added.

“The rate of new infections had declined significantly, and some restrictions had been eased earlier than had previously been thought likely.”

Despite the renewed optimism, the RBA warned that the outlook remained “highly uncertain”, with the pandemic likely to have “long-lasting effects on the economy”.

According to the central bank, its monetary policy strategy, which also included a quantitative easing (QE) program and a $90-billion term funding facility (TFF), has helped mitigate stability risks.

PROMOTED CONTENT


“Members agreed that the bank’s policy package was working broadly as expected. The package had helped to lower funding costs and stabilise financial conditions, and was supporting the economy,” the central bank said.

“The package had also contributed to a significant improvement in the functioning of government bond markets, and the yield on three-year Australian government bonds was at the target of around 25 basis points.

“Given these developments, the bank had purchased government bonds on only one occasion since the previous meeting, although it was prepared to scale up these purchases again, if necessary, to achieve the yield target and ensure bond markets remain functional.”

The board reiterated that the 0.25 per cent target rate would remain in place “until progress was made towards the goals for full employment and inflation”.

The central bank concluded by lauding the “substantial, coordinated and unprecedented” level of fiscal and monetary policy stimulus.

“It was likely that this fiscal and monetary support would be required for some time,” the central bank stated.

“The RBA concluded: The board remained committed to supporting jobs, incomes and businesses and to making sure that Australia is well placed for recovery.”

The RBA concluded: “Its actions were keeping funding costs low and supporting the supply of credit to households and businesses. This accommodative approach would be maintained as long as required.”

[Related: Stimulus wanes bank dependence on foreign funding]

RBA optimistic amid early COVID relief
RBA
mortgagebusiness

Are you a new-to-industry broker in the process of growing your business? Then there’s some great news: The Adviser’s New Broker Academy is back in 2021 and will provide you with essential insights into cutting-edge tools, strategies and processes to fast-track to success. Don’t miss your chance to attend. To secure your FREE place, visit newbroker.com.au now!

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

Latest News

OPINION: Debt-to-income ratio limits: do they help, or hinder? With the average property in Australian capital cities now over $700,000, l...

The Treasurer has met with regulators to discuss the housing market and consider whether “carefully targeted and timely adjustments” ...

The platform has become the first private sector exchange accredited under the ​​Trusted Digital Identity Framework. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.