RBA ready to act further

Central bank says rate rises ‘some years away’

AUSTRALIA’S central bank believes the economy has done better than feared during the coronavirus crisis but the hit to growth will have a “long-lived impact” requiring policy support for years to come.

“There is considerable uncertainty over the path from here,” Reserve Bank of Australia deputy governor Guy Debelle (pictured) said in a speech yesterday.

“This uncertainty includes the behavioural responses as health restrictions are eased.

“There is also considerable uncertainty about the future, which will affect the decisions of businesses and households.”

The RBA will maintain the current policies to keep borrowing costs low and credit available, and is ready to do more as the circumstances warrant, he added.

The central bank slashed its cash rate to a record low 0.25 per cent in mid-march as entire sectors of the economy were shut down to curb the spread of COVID-19.

It has reiterated that the cash rate target will not be raised until it achieves the inflation and employment goals.

“Given the outlook for inflation and the labour market, this is likely to be some years away,” Mr Debelle said.

He said the Australian economy had performed somewhat better in the June quarter than feared, although the declines in both gross domestic product and hours worked were historically large.

The comments came as data from the Australian Bureau of Statistics showed that employment is continuing to pick up gradually after the huge losses caused by coronavirus lockdowns, recovering around 30 per cent of the jobs initially shed.

Total payroll jobs increased 1.0 per cent between mid-may and mid-june, according to the data released yesterday, although they were still down 6.4 per cent on their level in mid-march before the lockdowns. Between mid-may and mid-june, the easing of restrictions saw payroll jobs increasing faster for the under 20s, up by 4.1 per cent.

Between the week ended June 6 and the week to June 13, payroll jobs were unchanged, compared to a rise of 0.2 per cent the previous week.

Total wages paid rose by 0.2 per cent in the week, after a 0.3 per cent increase the week before.