RBA Governor Philip Lowe told a parliamentary economics panel that the board is “expecting progress to be made towards the inflation target and full employment”. But the progress will be “only gradual” with uncertainties. The board “has been discussing” the case of further easing. But considering the balance of pros and cons, RBA decided to keep cash rate unchanged this week.
Lowe added, “if the unemployment rate were to be moving materially in the wrong direction and there was no further progress being made towards the inflation target, the balance of arguments would tilt towards a further easing of monetary policy.”
Additionally, he also said it’s “still too early to tell” about the impact of China’s coronavirus outbreak. But he warned, “the impact is going to be large”. And, “given what we know at the moment”, the hit to Australian economy would be worse than SARS. He added, the outbreak could take 0.2% off the Australia’s growth. But, if the virus “persists for an extended period, the effect on economic activity is likely to be larger than currently projected,”
In the Statement of Monetary Policy, RBA cut 2020 year-average GDP growth forecast from 2.75% to 2.25%. But 2020 year-average GDP growth forecasts was held unchanged at 3.00%. Unemployment rate forecast was lowered from 5.25% to 5.00% by December 2020, and from 5.00% to 4.75% by December 2021. Headline CPI forecasts was unchanged at 1.75% by December 2020 and 2.00% by December 2021.
