RBA boss says worst of slump has passed

RESERVE Bank governor Philip Lowe has declared the “worst of the global economic contraction” over but urged the Federal Government to maintain extra levels of fiscal support “for some time”.

It comes as the central bank keeps the cash rate on hold at its all-time low for the fourth month in a row amid the continuing fallout from the coronavirus pandemic. The RBA has held the rate at 0.25 per cent since delivering an out-ofcycle cut on March 20, when it also launched an emergency money-printing program.

Between then and early May, it bought more than $50 billion worth of Federal and State Government bonds — a stimulus scheme that has the effect of putting downward pressure on borrowing costs across the economy.

In his statement following the RBA board’s monthly meeting on Tuesday, Dr Lowe said the RBA was prepared to “scale-up” the bond-buying program again if necessary.

“Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed,” he said. “Despite this, the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus.”

Dr Lowe also said fiscal policy — in this case, government stimulus — was playing a key role. “The substantial, co-ordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that fiscal and monetary support will be required for some time.”

The Federal Government’s Jobkeeper scheme, providing payments based on staff headcount to businesses affected by the pandemic, is among the stimulus programs that have been rolled out in Australia.

Westpac chief economist Bill Evans said Dr Lowe’s statement “clearly signalled steady policy”, except with regard to its bond-buying program.