Our actions should not be confused with financing the government


Comments by RBA governor, Philip Lowe

  • Monetary response is keeping funding costs low
  • Will continue to adjust bond, repo operations as required to support liquidity
  • Next few months are going to be difficult for the Australian economy
  • There is a high level of uncertainty about the future
  • 1H 2020 likely to see biggest contraction in national output, income since 1930s
  • National output likely to fall around 10% in 1H 2020
  • Most of this decline is expected to take place in Q2
  • RBA to schedule bond auctions on three days each week (Mon, Wed, Thurs)
  • But does not necessarily mean will purchase bonds in each of these days
  • Unemployment rate likely to be around 10% by June
  • Will scale up bond purchases again if needed
  • Will buy bonds in whatever quantity to achieve our goals
  • It is likely unemployment rate will remain above 6% over the next few years
  • Not expecting a quick recovery to business as usual in Australia

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The above remarks basically reaffirms that they would expect economic data to reflect worsening conditions over the coming weeks/months, and that they will continue to do what is necessary to ensure that there is no severe economic/financial fallout.

Just take note that the RBA is still deploying QE in a more yield curve control manner right now, so they do still have some leeway in that sense to increase bond purchases.

Otherwise, Lowe’s remarks just confirms that the current set of easing measures and low rates are here to stay and will be in place over the next few years at the very least.

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