In a speech about the coronavirus and the Australian economy, Deputy Governor of the Reserve Bank of Australia Guy Debelle noted the likely form of quantitative easing-style program of government bond buying as the RBA sets the official cash rates staying low.

“We need interest rates to be low for a sufficiently long period of time,” Dr Debelle said. 

Dr Debelle highlighted the coronavirus impact and market forecasting further rate cuts could mean Australia is forced to go down the unconventional monetary policy route.

“There are scenarios in which we are going to consider that. We want to keep the risk-free rate low. We want interest rates to be low for a long period of time, to see unemployment decline and inflation rise within the inflation target,” Dr Debelle said.

“We talk about the likely future path of interest rates, generally known as forward guidance, to validate that we would be operating in the bond market as necessary to keep government bond rates consistent with our outlook for interest rates.”

The RBA, which recently reduced the official cash rate to a record-low 0.5 of a percentage point, which it previously stated that 0.25 of a percentage point was the lower bound before looking for unconventional monetary policy.

Defying the sceptics, Dr Debelle said: “Monetary policy still works. If you look at the reductions last year, they are transmitting through to the economy pretty much the same way it always has.

“We can’t do anything about the supply side of the economy, but we can sustain demand. The exchange rates still clearly work, putting cash in people’s pockets is still clearly there and we saw the effects of that through the rate cuts last year and we don’t have any reason to think that is different now.”

He believes a combination of fiscal monetary stimulus would work together to help lift the economy out of the dip the coronavirus has provided. 

“Fiscal and monetary policy are working to get us through this episode. In the end, we’ll come out of the other side of this because the virus only has a finite life,” Dr Debelle said.

Finally, Dr Debelle highlighted China, which largely saved the Australian economy during the global financial crisis, would look to stimulate, which will support the Australian economy.

“My sense is from listening to the commentary of Chinese policymakers as they have put stimulus back on the top of the agenda,” Dr Debelle concluded.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

more on this topic

Economy

Financial pressures and the 'she'll be right' attitude delay Australian divorces

In a revealing study, the Real Cost of Separation Report 2026 by Real Insurance has uncovered a trend of 'quiet uncoupling' among Australians, with financial pressures and concerns for children ...Read more

Economy

Labour market resilience provides RBA room for manoeuvre, says State Street economist

In the wake of the latest Labour Force data release, State Street, a global leader in financial services with a staggering US$54.5 trillion in assets under custody and administration and US$5.5 ...Read more

Economy

Geopolitical tensions shape investor strategies in private markets

In the face of mounting geopolitical tensions, investors are honing their strategies in private markets, as revealed by the 44th edition of the Coller Capital Global Private Capital BarometerRead more

Economy

Ellerston sees investment shift as Middle East tensions ease and inflation persists

Amid signs of easing tensions in the Middle East with US-Iran peace negotiations progressing, albeit at a slower pace than desired by markets, investors are being advised to reevaluate their ...Read more

Economy

Global markets face stagflationary pressures amid rising inflation and diverging growth

In a recent macroeconomic report, the Franklin Templeton Fixed Income team has highlighted that global markets are increasingly encountering a stagflationary environment, characterised by intensifying ...Read more

Economy

Corporate capex provides solid footing for US equities, says ClearBridge

In a promising development for the US economy, corporate capital expenditures (capex) are playing a crucial role in supporting economic growth, according to Jeff Schulze, head of economic and market ...Read more

Economy

Brands turn to household care and laundry strategies to weather cost-of-living crisis

As the UK braces for a 13% hike in its energy price cap by July 2026 and US gas prices soar to a four-year high due to geopolitical tensions, the global spotlight is once again on the cost-of-living ...Read more

Economy

GDP data prompts State Street expert analysis on cash rate and trade surprises

In light of the latest GDP figures, State Street, a global leader in financial services with a staggering US$54.5 trillion in assets under custody and/or administration and US$5.5 trillion in assets ...Read more