RBA has upbeat take on rebound

THE Reserve Bank says its “best guess” is Australia’s economy grew in the past quarter, meaning the nation has emerged from recession.

Appearing before a parliamentary committee on Tuesday, RBA deputy governor Guy Debelle said it appeared the economy had grown in the three months to September.

The impact of Victoria’s lockdown on growth during the quarter was potentially more mild than previously expected, Dr Debelle said.

“Our best guess is it looks like the September quarter for the country recorded positive growth rather than slightly negative,” he said.

“As best as we can tell, the growth elsewhere in the country was more than the drag from Victoria, and possibly the drag from Victoria was a little less than what we guessed back in August.”

A recession is technically defined as at least two consecutive quarters in which the economy, measured by gross domestic product, shrinks.

Australia’s GDP fell 0.3 per cent in the first quarter this year, then contracted again in the June quarter, by a steep 7 per cent.

It was the first recession in Australia in almost 30 years after the nation managed to avoid the worst of the fallout from the global financial crisis in 2008-09.

Official GDP figures for the September quarter are not due until early in December, but the RBA will provide more detailed economic forecasts on Friday next week, in its quarterly Statement of Monetary Policy.

The central bank is widely expected to cut interest rates to fresh lows next Tuesday as part of its efforts to help mitigate the economic damage from the coronavirus pandemic.

Economists broadly believe that as well as cutting the cash rate from 0.25 per cent to 0.1 per cent, the RBA will announce other measures to stimulate the economy.

Dr Debelle also said on Tuesday that government stimulus would need to continue until unemployment levels were “comfortably” below 6 per cent, and a premature tapering of economic aid would hinder recovery efforts.

When questioned by Labor Senator Katy Gallagher on the impact of the pandemic on wage growth, Dr Debelle said: “The main objective is to get people back into employment.”

The central bank said regions that were heavily reliant on overseas tourism would probably struggle while international borders were closed.

Services sectors such as entertainment would continue to be affected by the pandemic, while construction and industrial sectors were experiencing increased demand, Dr Debelle said.