The RBA has opened November with a cup day cut, slashing rates to a record low of 0.1 per cent in a move first flagged in October. More importantly, the RBA has now embraced unconventional monetary policy with its decision to launch a fully-fledged quantitative easing program that will see it buy $100 billion of government bonds of maturities of around five to 10 years.
“At its meeting today, the board decided on a package of further measures to support job creation and the recovery of the Australian economy from the pandemic,” said RBA governor Philip Lowe.
“With Australia facing a period of high unemployment, the Reserve Bank is committed to doing what it can to support the creation of jobs. Encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago. Even so, the recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus.”
While the pressure was on for a budget day cut in October, the RBA instead adopted a wait-and-see approach as it worked to understand the impact that the budget measures would have on the Australian economy. However, it remains unclear whether ultra-low interest rates and large-scale asset purchases will have a substantial impact on the recovery, with the RBA itself noting that the efficacy of monetary stimulus was effectively exhausted after its cut to 0.25 per cent.
