RBA announced a package of policy action today, as widely expected. The package includes:
- Cut in cash rate target to 0.1%
- Cut in 3-year AGS yield target to around 0.1%
- Cut in Term Funding Facility interest rate to 0.1%
- Cut in Exchange Settlement balances rate to 0%
- Purchase of AUD 100B of government bonds of maturities of around 5 to 10 years over the next six months.
The central bank acknowledged that recent data have been “a bit better than expected” and “near-term outlook is better than it was three months ago”. But “recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus.”
Q3 GDP is expected to report positive growth. But it will “take some time to reach the pre-pandemic level of output”. GDP is projected to grow around 6% over the year to June 2021, and 4% in 2022. Unemployment rate is projected to peak at a little below 8 per cent, rather than the 10 per cent expected previously. Unemployment rate is expected to drop be to around 6% at the end of 2022.
