SYDNEY–The Reserve Bank of Australia left interest rates unchanged Tuesday and affirmed its current targeting of bond yields while warning the economy will be hit hard by the corona pandemic in the second quarter.
The RBA’s official cash rate was left at a record low 0.25%, the bank said. The three-year bond yield target was also kept at 0.25%.
“There is considerable uncertainty about the near-term outlook for the Australian economy…a very large economic contraction is expected to be recorded in the June quarter and the unemployment rate is expected to increase to its highest level for many years,” RBA Governor Philip Lowe said in a statement.
Interest rates are set to remain low for a long period, he added.
“The board is committed to doing what it can to support jobs, incomes and businesses as Australia deals with the coronavirus,” Mr. Lowe said.
“The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2%-3% target band,” he added.
The RBA deployed alternative policy measures in March for the first time as the coronavirus pandemic forced social distancing on the population, shut firms and closed borders to international traffic.
When compared with other major economies, Australia has managed to limit the number of deaths from the coronavirus, but it has been hard hit nonetheless with tourism and education exports flattened while consumer spending has weakened.
Federal and state governments have responded to the pandemic with massive fiscal stimulus but despite the outlays, Australia is set to sink into its first recession since the early 1990s, economists have warned.
Data earlier Tuesday showed job advertisements fell by 10.3% in March, the biggest fall since the global financial crisis.
Still, consumer confidence was up with the ANZ attributing the rise to government measures to support incomes and keep workers on payrolls.
Write to James Glynn at [email protected]
