The Reserve Bank of Australia sees no need to adjust its policy measures in the current environment, minutes of its July policy meeting show.
The Reserve Bank of Australia sees no need to adjust its policy measures in the current environment, minutes of its July policy meeting show, and board members have reiterated that negative interest rates remain "extraordinarily unlikely".
The bank on July 7 left the cash rate at 0.25 per cent in a widely expected decision and says the "accommodative approach will be maintained as long as it is required".
Its package of measures includes the cash rate at 0.25 per cent, an "unlimited" government bond buying program, term funding facility for banks and an interest rate of 10 basis points on exchange settlement balances held by financial institutions at the RBA.
"Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted," the minutes, released on Tuesday, show.
The coronavirus pandemic has crippled business and consumer activity across Australia where unemployment is running at a 22-year high as the nation braces for its first recession in nearly three decades.
The RBA has repeatedly said the shock to the Australian economy from the pandemic will be the most severe since the 1930s, while the outlook remains highly uncertain.
The July policy meeting took place when Australia's second most populous state of Victoria had just started to see a spike in coronavirus cases, forcing authorities to re-introduce strict mobility restrictions including shutting its border with NSW.
The RBA minutes also reiterate, citing a speech by Governor Philip Lowe in November 2019, that negative interest rates are extraordinarily unlikely.
There is no case for intervention in the foreign exchange market either, "given its limited effectiveness when the exchange rate is broadly aligned with its fundamental determinants, as at present".
Mr Lowe gave a speech this afternoon on COVID-19, the labour market and public sector balance sheets.
He warned more people would lose their jobs even as the economy reopened, with businesses now assessing the damage from the coronavirus recession.
However, Dr Lowe says the government need not be scared of going into debt to help people.
If it doesn't, it risks leaving the nation with severe economic scars.
These include young people never managing to get on the jobs ladder, and people losing out on training opportunities and damaging their long-term prospects.
"We need to do what we can to limit the severity of these costly scars. These scars have long-term effects and they damage our society and our economy," Dr Lowe said today.
The drop in jobs and hours was staggering, but it was smaller than expected, and many firms were now rehiring as coronavirus restrictions ease.
But Dr Lowe said other sectors, such as construction and professional services, were facing troubled times as their pipeline of work dried up and new orders fell.
Others were reconsidering their business models, dealing with a drop in demand or looking anew at how to manage their workforce.
"Restructuring and the uncertainty about future demand is likely to weigh on the labour market as it recovers."
Prime Minister Scott Morrison also pointed to the expectation more jobs would be shed in the latter part of the year amid changes to the JobKeeper wage subsidies program.
"I would expect businesses, several months into the pandemic, to be making their own decisions now about those who are going to be continually working in their businesses," Mr Morrison said.
"They will make judgments about who they're going to keep on and then who they won't be able to keep on."
Dr Lowe said the government's JobKeeper and increased JobSeeker unemployment payments were important to keeping confidence in the economy.
But they required the government to borrow against the nation's future income in order to smooth out the hits to its current income.
"For a country that has got used to low budget deficits and low levels of public debt, this is quite a change," he said.
"But it is a change that is entirely manageable and affordable, and it's the right thing to do in the national interest."
