Reserve Bank of Australia Statement on Monetary Policy
- says need to balance benefits of easing with risks of very low rates
- risks include fuelling more borrowing when home prices already in strong upswing
- increasing concerns internationally about the effects of low interest rates
- balance of risks might shift if unemployment rate were to be "moving materially higher"
- and if there was no further progress being made on lifting inflation
- policy expected to remain accommodative for some time
- cuts near-term growth forecast to reflect drought, bushfires, coronavirus
- "very uncertain" how long impact of coronavirus will last
- cuts GDP forecast for Q4 2019 to 2.0% (vs 2.3%), June 2020 to 1.9% (vs 2.6%)
- GDP seen 2.7% Dec 2020, 3.1% June 2021, 3.0% Dec 2021, 2.9% June 2022
- trimmed mean inflation seen 1.8% Dec 2020, 1.9% Dec 2021, 2,0% June 2022
- unemployment seen 5.1% Dec 2020, 4.9% Dec 2021, 4.8% June 2022
- wage growth seen 2.3% Dec 2020, 2.2% Dec 2021, 2.2% June 2022
- RBA forecasts based on technical assumption of one 25 bps rate cut in mid-2020
I bolded that comment on a clear signal for the next cut
For the GDP, inflation and unemployment forecasts from the Bank please keep in mind that their history over past years has been to be far too optimistic on all of these. I can't see any reason to think this time would be any different.
Even if the forecasts turn out to be accurate this time … the Bank's target for inflation will not be hit until June of 2022, which is 29 months away. The policy makers at the RBA are paid well to do their job, Governor Lowe is on a million AUD - which is not bad for a public servant. I am not convinced that with their performance the taxpayers are getting value for money.
