RBA meets as economic outlook deteriorates | Liverpool City Champion
The Reserve Bank of Australia will have plenty of data to sift through when it holds its monthly board meeting on Tuesday.
There have been a slew of numbers over the past month that have seen economic growth slow after its galloping recovery from last year’s recession and signs of a sharp slowdown in the September quarter.
There is no doubt that the RBA will leave the spot rate at an all-time high of 0.1% at the meeting.
But economists are wondering whether to expect any changes to its bond buying program, which aims to keep market interest rates and borrowing costs low.
The RBA had planned earlier this year to reduce its weekly purchases to $ 4 billion from $ 5 billion from September.
Some economists believe this will delay this rollback, or what’s called the cutback, in the face of the deteriorating outlook due to COVID-19 lockdowns in NSW and Victoria, the country’s two most populous states.
The Treasury predicts that these lockdowns could cause a contraction of at least $ 2 billion, while economists estimate it at $ 4 billion.
Westpac chief economist Bill Evans believes the RBA should respond by increasing its bond purchases to $ 6 billion per week.
“It would not be the magnitude of the increase but the signal that the RBA was prepared to do more than just reverse the August decision and respond to the deteriorating outlook,” Evans said.
Economists will also be looking for any signs of a change in the RBA’s forward interest rate forecast given the more uncertain outlook.
The RBA wants to see inflation sustainably in its inflation target of two to three percent, which will require the unemployment rate to fall to four percent and wage growth of at least three percent.
She does not expect these conditions to be met until 2024.
As the unemployment rate fell to a 12-year low of 4.6 percent in July, the expected economic slowdown is expected to see that increase again above five percent.
At the same time, wage growth remained weak at 1.7 percent in the June quarter.
Two separate indicators this week will give an idea of the current state of the labor market.
The Australian Bureau of Statistics will release its paid jobs report for the fortnight ending August 14 on Thursday, a guide to the full August workforce report expected later this month.
The week kicks off Monday with ANZ posting its August Monday job posting series, an indicator of future hires.
Meanwhile, Australian stocks are expected to open lower after a generally soft finish on Wall Street after its key monthly payroll report showed only 235,000 jobs were added to the US economy in August.
Investors saw this as surprisingly weak after the previous two months of robust hiring, but at a time when the highly contagious Delta variant discouraged people from flying, shopping and dining out.
The S&P 500 lost 1.52 points, or less than 0.1%, to 4,535.43. The Dow Jones Industrial Average lost 74.73 points, or 0.2%, to 35,369.09.
The Nasdaq composite reversed the trend, rising 32.34 points, or 0.2%, to 15,363.52, its third consecutive gain.
Australian equity futures were down 23 points to 7,483.
Australia’s benchmark S & P / ASX200 ended up 37.2 points, or 0.5%, at 7,522.9 on Friday.
Associated Australian Press