Invest
Negative interest rates unlikely, says RBA boss
The Reserve Bank of Australia still has two bullets to fire, considering 0.25 per cent as the “lower bound” before implementing unconventional monetary policy, governor Philip Lowe has said.
Negative interest rates unlikely, says RBA boss
The Reserve Bank of Australia still has two bullets to fire, considering 0.25 per cent as the “lower bound” before implementing unconventional monetary policy, governor Philip Lowe has said.
In a speech made at the Australian Business Economist Dinner, Dr Philip Lowe outlined the options for the Australian economy to reach its 2-3 per cent inflation target, but said it was more likely that interest rates would stay low for an extended period.
Since the global financial crisis, central banks have tried various methods to achieve stronger economic growth.
Mr Lowe said there are four tools that the central bank could implement: negative interest rates, extended liquidity operations, asset purchasing-quantitative easing, or forward guidance.
Dr Lowe noted that conventional monetary policy is working in Australia, as the economy is benefiting from low rates, recent tax cuts, infrastructure spending, and an upswing in property prices.
He said the Australian economy growth prospects and banking systems are stronger than Europe and Japan, meaning “negative interest rates in Australia are extraordinarily unlikely”.
“There may come a point where QE could help promote our collective welfare, but we are not at that point, and I don’t expect us to get there,” Dr Lowe said.
After three cuts to the cash rate, economists, including chief economist for Australia and New Zealand at Goldman Sachs, Andrew Boak, believe the bank has to do something to achieve its inflation target.
The Reserve Bank has missed its inflation target for 15 consecutive quarters, although Treasurer Josh Frydenberg has previously noted the bank will achieve its targets in the medium term.
“In Australia’s case, we actually think QE is not preferable to a direct lending program to banks, we actually think that would be a more effective way to do unconventional policy.”
Given the RBA has previously noted it does not want negative interest rates, QE looks more likely, according to Mr Boak.
About the author
About the author
Cash
Interest rates to rise next year?
Commonwealth Bank has seconded Westpac’s predictions, forecasting that interest rates will rise well ahead of the RBA’s 2024 timeline. ...Read more
Cash
RBA makes latest official cash rate call
The Reserve Bank of Australia has made its May call on the official cash rate, with the economy said to be a long way from the conditions needed to precede a rate rise. ...Read more
Cash
RBA puts chatter of an earlier rate hike to rest
The Reserve Bank of Australia has put to rest chatter among investors that conditions for a higher cash rate could be met as early as next year, reaffirming its stance that the rate is “very likely...Read more
Cash
Australia tipped to go cashless by 2024
Australia is forecast to effectively go cashless in just three years, with three in 10 Aussies admitting that “going cashless would be great for the country”. ...Read more
Cash
Tips to finding a middle ground between equities and term deposits
With record-low interest rates and a volatile sharemarket, mature Australians looking to protect their assets while maintaining their income are being driven to fixed-income products, an industry expe...Read more
Cash
What’s next for paper money?
How many times in the past week have you actually had to pull out your wallet to pay for something? And out of those times, did you actually go to use cash? ...Read more
Cash
Last rate day of the year revealed
The Reserve Bank of Australia has announced its decision on the official interest rate for December, following predictions of a hold. ...Read more
Cash
RBA hands down rate decision on cup day
The Reserve Bank of Australia has announced its decision on the official interest rate this month, following predictions of a potential cut to rates. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Cash
Interest rates to rise next year?
Commonwealth Bank has seconded Westpac’s predictions, forecasting that interest rates will rise well ahead of the RBA’s 2024 timeline. ...Read more
Cash
RBA makes latest official cash rate call
The Reserve Bank of Australia has made its May call on the official cash rate, with the economy said to be a long way from the conditions needed to precede a rate rise. ...Read more
Cash
RBA puts chatter of an earlier rate hike to rest
The Reserve Bank of Australia has put to rest chatter among investors that conditions for a higher cash rate could be met as early as next year, reaffirming its stance that the rate is “very likely...Read more
Cash
Australia tipped to go cashless by 2024
Australia is forecast to effectively go cashless in just three years, with three in 10 Aussies admitting that “going cashless would be great for the country”. ...Read more
Cash
Tips to finding a middle ground between equities and term deposits
With record-low interest rates and a volatile sharemarket, mature Australians looking to protect their assets while maintaining their income are being driven to fixed-income products, an industry expe...Read more
Cash
What’s next for paper money?
How many times in the past week have you actually had to pull out your wallet to pay for something? And out of those times, did you actually go to use cash? ...Read more
Cash
Last rate day of the year revealed
The Reserve Bank of Australia has announced its decision on the official interest rate for December, following predictions of a hold. ...Read more
Cash
RBA hands down rate decision on cup day
The Reserve Bank of Australia has announced its decision on the official interest rate this month, following predictions of a potential cut to rates. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
