The Reserve Bank of Australia (RBA) has announced in their monthly meeting that they expect the Australian economy to retract in the June quarter and remain so through to September as the Coronavirus pandemic tightens its grip on the global economy.
Board members agreed that Australian government stimulus responses such as the JobKeeper program will help mitigate the damaging effects that business shutdowns have on the nation’s economy, business conditions and investment across the country have continued to worsen.
RBO governor Philiop Lowe has suggested in a recent press conference that he expects GDP to fall by around ten percent in the first half of this year, as well as unemployment figures reaching ten percent as well. Lowe also said he was not willing to call this just another recession, calling this a once-a-century type of downturn, not simply a retraction seen in a regular business cycle.
The RBA has not changed the current interest rate from the current 0.25 percent seen currently, and is continuing to implement its Quantitative Easing (QE) measures by buying government bonds. The markets were surprised, however, at the fact that the RBA has explicitly stated that bond purchases would be tapered whenever conditions permitted this to be possible, seemingly calling an end to their QE measures as soon as they could safely do so.
The Reserve Bank board has also stated that while stimulus measures were expected to increase the amount of people employed, the nation will still see household incomes and spending being lower than usual.
This reveals the foundation of the pessimism seen in this recent RBA report.