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Rates unchanged but uncertain economic recovery remains
The RBA has held the official cash rate at 0.25 per cent but warns of an uncertain future, with unemployment and consumer spending remaining a major stumbling block for Australia’s economic recovery.
Rates unchanged but uncertain economic recovery remains
The RBA has held the official cash rate at 0.25 per cent but warns of an uncertain future, with unemployment and consumer spending remaining a major stumbling block for Australia’s economic recovery.
In a statement to the media, governor of the Reserve Bank Philip Lowe outlined how the economy is facing its biggest contraction since the 1930s, with only government spending keeping Australians employed.
“Many people have lost their jobs, and there has been a sharp rise in unemployment. Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed,” Mr Lowe said.
“Despite this, the outlook remains uncertain, and the recovery is expected to be bumpy and will depend upon containment of the coronavirus.”
Mr Lowe highlighted that consumer spending still remains a major headwind for the nation’s economic recovery.
“Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans,” the governor continued.
However, the governor believes the economy is starting to show signs of improvement.
“Conditions have, however, stabilised recently and the downturn has been less severe than earlier expected,” he said.
The ABS estimates that a combined group of around 2.3 million people – around one in five employed people – were affected by either job loss between April and May or had less hours than usual for economic reasons in May.
However, the governor pointed out how the rate of change has slowed with Australians gradually emerging post COVID-19 lockdowns.
“While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely,” Mr Lowe said.
“There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country.”
“Notwithstanding the signs of a gradual improvement, the nature and speed of the economic recovery remains highly uncertain,” he said.
Mr Lowe once again called for additional fiscal support to help guide the economy through a difficult period.
“The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that fiscal and monetary support will be required for some time,” Mr Lowe concluded.
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