Philip Rowe and his Reserve Bank board members will sit in a significantly different set of situations when they meet on Tuesday than they did just a month ago.
In early July, Governor Rowe praised the economy for his powerful bounces faster than expected.
“The Australian economy is on a positive path,” Rowe said.
But four weeks later, economists predicted a sharp economic contraction in the September quarter, changing the outlook.
This is primarily the result of a long-term virus blockade in the Greater Sydney and New South Wales regions. Last month’s snap lockdowns in Victoria and South Australia also left a negative mark, similar to the current snap limits in Queensland.
At this stage, Treasury Secretary Josh Frydenberg does not expect a recession to extend into the December quarter. This will constitute a recession, but says it depends heavily on the success of the New South Wales blockade.
At the last meeting of the RBA Board, and given the rosy outlook at the time, we agreed to return to a bond purchase program aimed at keeping market interest rates and borrowing costs low.
Under the current program, instead of buying A $ 5 billion in government bonds a week, it will be reduced to A $ 4 billion from September.
Given that the RBA is reluctant to lower its cash rate any further to stimulate the economy and is already at a record low of 0.1%, will economists suspend this so-called bond purchase taper? , And even more likely to increase. In a rapidly deteriorating economy.
“Given the unexpectedly sharp economic downturn, the RBA Board remains committed to supporting the Australian economy by immediately increasing weekly bond purchases,” said Bill Evans, chief economist at Westpack. You should send a clear signal that you are. “
Rowe will issue a statement after the meeting as usual, but when faced with the House of Representatives Economic Committee on Friday, he will have the opportunity to further explain RBA’s actions.
On the same day, the central bank will also release a quarterly report on monetary policy. The statement includes the latest forecasts for economic growth, unemployment and inflation.
Being the first week of the new month, we also have a wealth of new data, including releases on home prices, consumer sentiment, building approvals, lending, international trade, and payroll jobs.
Meanwhile, Australian stocks are about to make a solid start to the week, even though Wall Street stumbled on the last trading day of the month.
The S & P 500 fell 23.89 (0.5%) to 4,395.26. The Dow Jones Industrial Average fell 149.06 (0.4%) to 34,935.47, and the Nasdaq Composite Index fell 105.59 (0.7%) to 14,672.68.
This decline was caused by a 7.6% drop in heavyweight Amazon after reporting sales growth that wasn’t as strong as analysts expected.
However, Australian equity futures rose 37 points (0.5%) to 7,337, ahead of a strong local earnings season.
Friday’s Benchmark S & P / ASX200 Index closed at 7,392.6, down 24.8 points (0.33%).