Minutes of March 3 RBA meeting noted that “it was becoming increasingly clear that COVID-19 would cause major disruption to economic activity around the world”. The recent outbreak outside of China ” raised the prospect of a broader and more extended disruption to the global economy”.

The global development “was having a significant effect on the Australian economy, particularly in the education, transport and tourism sectors”. Uncertainty was also likely to “affect household spending and business investment in coming months.” Q1 GDP was likely to be “noticeably weaker than previously expected”.

Board members have considered a “number of scenarios” regarding monetary policy response to coronavirus outbreak. If the outbreak would be contained in the very near future, “maximum effect” of further stimulus would be felt in the “recovery phase”. However, this scenarios was considered “very unlikely, with the more realistic scenario being that the outbreak would have a significant effect on the Australian economy.”

RBA cut interest rate by 25bps to 0.50% at that meeting. Earlier on Monday, it indicated that there will be additional measures to be announced this coming Thursday. Markets generally expect another rate cut to bring the benchmark rate down to 0.25%.

Australia Westpac Consumer Sentiment Index fell -3% to 81.2 in August. The reading was on par with the lows of the Covid and Global Financial Crisis. Also, there was a cumulative decrease of -22.9% from recent peak made in November 2021.

Economic conditions for the 12 months dropped from 80.3 to 73.9. Economic conditions for the next five years dropped from 91.6 to 90.7. Unemployment expectations index dropped from 109.8 to 103.4. House price expectations index dropped from 104.9 to 97.1.

Regarding RBA’s next meeting on September 6, Westpac expects the central bank to hike by another 50bps to 2.35%, leaving the cash rate in “neutral range”. It expects RBA to then scale back the increase to 25bps per meeting until February 2023.

Full release here.