RBA Meeting Takes A Back Seat Following Out Of Cycle Cuts

By Glenn Dyer | More Articles by Glenn Dyer

Tomorrow’s Reserve Bank board meeting looks anti-climatic.

The central bank will be looking for a rest after its busy March when it cut the cash rate to a record low of 0.25% and put in place a series of supports for the financial system to allow it to flex as pressure from the COVID-19 pandemic started slamming into it.

The federal government more than played its part with a series of novel support moves and packages for workers, small and medium companies, aviation, child care, and rural Australia.

The cost will be around $300 billion and the debt burden for the country will rise by 50% or more over time to a gross figure of more than $700 billion.

With the cash rate “was now at its effective lower bound” and that “there was no appetite for negative rates”.

However, the AMP’s Chief Economist, Dr. Shane Oliver says “the RBA could indicate a willingness to expand its low-cost funding facility for banks and should consider expanding its bond-buying program to the corporate debt market.”

The RBA will also release its first Financial Stability Review of the year on Thursday “which will be interesting to the extent that it may provide some assessment as to how the Australian financial system is faring in the current difficult environment,” Dr Oliver says.

Retail sales data for February, released last Friday, showed a rise of 0.5%, seasonally adjusted, according to the Australian Bureau of Statistics (ABS), a touch faster than the early estimate of 0.4%.

“Retailers reported a range of impacts from COVID-19 in February” Ben James, the ABS Director of Quarterly Economy Wide Surveys said on Friday, “with increases in food retailing slightly offset by falls in more discretionary spending.”

The latest figures were boosted by a 3.1% rise in department store spending (Myer has now closed, so the fall in April will be steep), a 0.8% rise in food retailing, and a 0.7% rise in household goods. Clothing and footwear fell by 2.9% during the month, the largest fall in two years.

The final manufacturing activity survey for March showed a big rise in output concentrated in consumer goods such as paper products and pharmaceuticals.

But the car sales data for March showed a more telling picture. New car registrations fell heavily last month, driven by coronavirus disruptions and a rise in unemployment.

According to the Federal Chamber of Automotive Industries, 81,690 new cars were sold last month across the country, down 17.9% on the same period a year earlier.

It was the weakest March result in 11 years and sales fell across the board in all vehicle types. But the figure for the month was above the 71,000 or so sales for January and February.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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