05 Aug RBA holds – but more stimulus likely
Key Points:
- Victoria’s tightening lockdown could knock at least $12bn off the Victorian and national economy and delay the return to positive Australian GDP growth to the December quarter.
- The further hit to the economy and likely additional upwards pressure on unemployment is increasing pressure for more policy stimulus. This is likely to see the federal budget deficit this year ultimately pushed up to $235bn (from the Government’s recent projection of $184.5bn).
- And while the RBA left monetary policy on hold at its August meeting further easing is likely ahead – it could take the form of a rate cut to 0.1% but the focus is likely to be on more quantitative easing beyond simply targeting the 3 year bond yield at 0.25% (ie what’s often called Yield Curve Control).
