RBA cuts 25bps, AUD rockets

Fresh from the loon:

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 0.50 per cent. The Board took this decision to support the economy as it responds to the global coronavirus outbreak.

The coronavirus has clouded the near-term outlook for the global economy and means that global growth in the first half of 2020 will be lower than earlier expected. Prior to the outbreak, there were signs that the slowdown in the global economy that started in 2018 was coming to an end. It is too early to tell how persistent the effects of the coronavirus will be and at what point the global economy will return to an improving path. Policy measures have been announced in several countries, including China, which will help support growth. Inflation remains low almost everywhere and unemployment rates are at multi-decade lows in many countries.

Long-term government bond yields have fallen to record lows in many countries, including Australia. The Australian dollar has also depreciated further recently and is at its lowest level for many years. In most economies, including the United States, there is an expectation of further monetary stimulus over coming months. Financial markets have been volatile as market participants assess the risks associated with the coronavirus. Australia’s financial markets are operating effectively and the Bank will ensure that the Australian financial system has sufficient liquidity.

The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors. The uncertainty that it is creating is also likely to affect domestic spending. As a result, GDP growth in the March quarter is likely to be noticeably weaker than earlier expected. Given the evolving situation, it is difficult to predict how large and long-lasting the effect will be. Once the coronavirus is contained, the Australian economy is expected to return to an improving trend. This outlook is supported by the low level of interest rates, high levels of spending on infrastructure, the lower exchange rate, a positive outlook for the resources sector and expected recoveries in residential construction and household consumption. The Australian Government has also indicated that it will assist areas of the economy most affected by the coronavirus.

The unemployment rate increased in January to 5.3 per cent and has been around 5¼ per cent since April last year. Wages growth remains subdued and is not expected to pick up for some time. A gradual lift in wages growth would be a welcome development and is needed for inflation to be sustainably within the 2–3 per cent target range.

There are further signs of a pick-up in established housing markets, with prices rising in most markets, in some cases quite strongly. Mortgage loan commitments have also picked up, although demand for credit by investors remains subdued. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality. Credit conditions for small and medium-sized businesses remain tight.

The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target. The Board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity. It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy.

As expected, too little. No understanding of anything.

David Llewellyn-Smith
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Comments

  1. “The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target.”

    That’s one of the all time understatements…

    • DominicMEMBER

      That sort of wisdom doesn’t come cheap – now get back to work, because you’re paying (through the nose) for it.

    • happy valleyMEMBER

      Captain Phil was always living a lie with his 4.5% unemployment excuse target and now it will never happen in his lifetime other than if some BB workers fall off the perch from ScoVID-19.

    • buttzilla sixteen

      cut teh rates, open teh gates, blame teh states……………. that will fix thang.

    • Jumping jack flash

      Coronavirus couldn’t have happened at a better time!

      Just when the limits of a debt-based currency are being reached – interest rates can’t be manipulated any more, and QE-ing all over the economy does little to help anything, they’re wringing their hands wondering what the devil they can do, suddenly from out of nowhere they have an excuse for its collapse.

      How very convenient.

      • PlasterMEMBER

        They’re running so fast – they don’t know or care what’s happening.

        The only imperative is that they must run fast enough to keep the loan out of default.

        Don’t waste time reading this sh1t,

        Back to work!!!

  2. darklydrawlMEMBER

    “The unemployment rate increased in January to 5.3 per cent and has been around 5¼ per cent since April last year. Wages growth remains subdued and is not expected to pick up for some time. A gradual lift in wages growth would be a welcome development”….

    None of which seems likely whilst we are running a turbo charged immigration scheme. Surely it is NOT that difficult to join the dots?

    • GeordieMEMBER

      One in twenty people who want work can’t get any whatsoever and underemployment rife. Yeah, they’re on their game. Tards.

    • “Surely it is NOT that difficult to join the dots?”

      They know. They’re just pretending that they don’t.

    • darklydrawlMEMBER

      They don’t have much wriggle room left – at least on the positive side of the equation.

    • GeordieMEMBER

      To punish savers, pretend to care about people being drowned by mortgage debt, and don’t give a flying F about everything else. Isn’t that their mandate?

      • DingwallMEMBER

        They are fixated on going out of their way to punish savers? Gawd savers are not the only piece on the board. How much sun and good times do you cater for?

      • happy valleyMEMBER

        R.ping savers is the favourite pastime of the RBA happy clappies, apart from chomping down caviar and quaffing Cristal. Presumably, the RBA happy clappies will be rewarded with the $250m refurb of their Martin Place ivory tower now that Captain Phil has done Scomo’s, Josh’s and his own god’s work?

        • GeordieMEMBER

          More concerned about people being pushed via low yields on cash into other assets in the vague hope of better returns. Them be crash dynamics, right there.

        • Jumping jack flash

          Everyone needs to take out another mortgage to celebrate.
          I just read an article that Sydney houses have broken the $1m dollar mark. Excellent news. Just think of how much faster the debt will need to grow now!

          We’ll turn this economy around yet! 2006 here we come!

  3. my take is all commodities will rally at some point as CBs cut rates and govs world over start to introduce fiscal. However, I now do expect to first see much bigger market falls before any of the above happens – as long as covid19 keep spreading at this rate.

  4. The90kwbeastMEMBER

    AUD going up post the cut, lol. Were the markets seriously expecting a 50bps cut after only on Friday not anticipating any cut? Funny world.

    • markets probably expect 50bp from FED and massive stimulus from China. But markets don’t expect shutdowns in China to last and it looks like markets don’t expect shutdowns from S Korea, Japan, EU.. while I say – we’ll see about that.. as long as this virus continue to spread at this rate.
      Yes, some factories will open up only to close again inside 4 weeks.

      • DingwallMEMBER

        ^ This. Every other CB is going to go for 0.5% so the RBA are the bunny in the big game. …….. again.

  5. “… The Board therefore judged that it was appropriate to ease monetary policy further to provide additional support to employment and economic activity. It will continue to monitor developments closely and to assess the implications of the coronavirus for the economy. The Board is prepared to ease monetary policy further to support the Australian economy…”

    They did not mention driving the AUD down.

    Which is funny because some people think that is the only thing the RBA should be thinking about.

    It is almost as though the RBA rate decision is really targeting the demand for bank credit secured by residential property.

    OMG.

    • The90kwbeastMEMBER

      Reckon they don’t care about theAUD anymore, $0.65 is pretty low anyway. Gotta be seen to be playing your part in the fight against Coronavirus…

      • DingwallMEMBER

        Pretty low ? If you rate our economy and strong, diversified and robust sure………. Is that your view?

        • The90kwbeastMEMBER

          It’s running around historical averages now. We import everything anyway, who wants an AUD at $.50, everything will just get 20% more expensive.

          • DingwallMEMBER

            When you make your bed you have to lie in it.,,……. the last 20+ years of governments have been happy to direct our “economy” down this pathway….. structurally it is horrible and anything above 70c is now in the lap of our masters … China

      • They never did care.

        The AUD has always been seen as a shock absorber and not a target for monetary policy.

        The ONLY thing the RBA has ever cared about is the demand for private bank credit and specifically private bank credit secured by land.

        The RBA is hoping that a frothy and frantic housing bubble will get us through the bat flu blues.

    • Jumping jack flash

      “It is almost as though the RBA rate decision is really targeting the demand for bank credit secured by residential property.”

      Stone the crows! Say it isn’t so!

      • Consider the crows stoned. Stoned seems to have a different meaning these days as compared to the original intent – but it seems appropriate.

  6. tax cuts stage 2 and 3 brought forward next?
    debtors to pay down debt and non debtors to cash splash?

  7. Jumping jack flash

    Hooray! Now we await the avalanche of debt to quickly follow and save the economy by creating new jobs and inflating wages!

    Quickly Scotty, assume the correct prayer position.
    Quickly Phil, don the loincloth of power, seize your shaman stick, and commence the writhing.

    We got this!

    • If you don’t have an over-priced you can’t call yourself a proper Australian.

  8. @David. I’ll ask again. Why do you encourage this cutting? When the RBA fails to raise rates in a year or two’s time, what are you going to recommend?! Have we learnt nothing from bringing forward on more borrowing by feeding more drugs to the junkie?

  9. If people had real savings, this whole charade wouldnt be necessary. Look at the Universities, already having to make cutbacks because some students might have to delay for a semester.
    Anybody heard of retaining a capital buffer?

    • The Windy City

      My thoughts as well. They probably do have some $ hidden in logs, they’re just not going to broadcast that.

    • Jumping jack flash

      If the banks didn’t fool everyone that debt is the same as real money and get everyone addicted to their debt, then cutting rates would have absolutely no effect on anything.

      As it has been observed, the effect on the wider economy, job creation and wages growth, from cutting what is essentially the interbank lending rate is precarious at best. It seems if the economy were a car, the RBA is driving the economy from the back seat of the car that’s driving next to the car that the people comprising the economy are actually in!

  10. I heard Phil has a bit of a cough now after eating off the stomach of a Chinese lady. He has swelling of the lungs but should be able to look through said inflation.