After back-to-back contractions in gross domestic product in March and June, which put Australia in its first recession in nearly three decades, the Reserve Bank of Australia (RBA) is already predicting Australia will be out of a recession when the September figures are released.
The RBA pointed out that Victoria’s lockdowns were not the economic drag previously predicted.
Speaking ahead of next week’s central bank board meeting and its quarterly statement on monetary policy, RBA deputy governor Guy Debelle confirmed that Victoria’s impact on the economy has not hurt overall economic growth.
“At the moment, it looks like the September quarter for the country probably recorded positive growth rather than slightly negative,” Dr Debelle told a Senate estate hearing.
“The growth elsewhere in the country was more than the drag from Victoria, and the drag from Victoria was possibly a little less than what we guessed back in August.”
When asked about the state of the Australian economy, Prime Minister Scott Morrison said it was too early to tell.
“I won’t know that until December when the national accounts figures for the September quarter will be released and until then, whether technically that’s the case or not I know Australians are still hurting,” Mr Morrison said.
“The national accounts will say what they say, but what I know is in the many months ahead, there are businesses that are still not open again, people we still need to get back into work, that’s the reality, and I’m focused on policies that deal with reality of the economic challenges we have ahead."
Despite the RBA predicting the economy is out of a technical recession, the central bank is still expected to cut the cash rate from a record low 0.25 per cent to 0.10 per cent on Melbourne Cup Day.
“This easing is expected to involve a cut in the three key interest rates – the cash rate target, the three-year bond yield target, and the term funding facility target from 0.25 per cent to 0.1 per cent,” Commonwealth Bank chief economist Stephen Halmarick said.
“Critically, this easing of monetary policy is expected to be implemented at the same time as the RBA looks set to revise upwards their economic forecasts given the run of better economic data.”
Mr Halmarick said monetary policy has a significant role to play in supporting the Australian economy by continuing to ensure very low borrowing costs, both for Commonwealth and State, are maintained for an extended period of time.
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