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Australia central bank seen reversing taper decision as lockdowns hit economy: Reuters poll

EconomyJul 28, 2021 11:11PM ET
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© Reuters. FILE PHOTO: An ibis bird perches next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz

By Swati Pandey

SYDNEY (Reuters) - Australia's central bank will likely reverse a decision to trim its bond buying programme when it holds its monthly meeting next week with the country's economy in dire straits due to a longer and deeper virus lockdown in Sydney.

All but one of 44 economists surveyed by Reuters between July 22 and 28 see no change to the policy rate of 0.1% at the Reserve Bank of Australia's (RBA) Aug. 3 board meeting with one predicting a cut to 0.05%.

Of the 25 economists who answered a question about the RBA's quantitative easing programme, 14 believe the central bank would reverse its taper decision made in July due to a fast-spreading COVID-19 outbreak in the country's most populous city.

Sydney is currently in its fifth week of coronavirus lockdown, which has been extended until the end of August led by a relentless surge in COVID-19 cases of the highly transmissible Delta variant.

"With recent COVID-19 developments, Australia has slipped from leader to laggard," said Nomura economist Andrew Ticehurst.

"We agree with others that the RBA will now likely put on ice its plans to taper bond buying from early September," Ticehurst said.

Last month, the RBA announced it would trim its bond buying programme to A$4 billion per week, from the current weekly pace of A$5 billion starting September as economic outcomes had handily surpassed expectations.

Since then, many economists have sharply downgraded forecasts for Australia's gross domestic product (GDP) in a dramatic reversal of the country's economic fortunes.

The A$2 trillion ($1.5 trillion) economy is seen shrinking in the current quarter, its first contraction since June 2020, with a heavy blow seen on the labour market and private consumption.

Economists also pushed back their expectations for the next RBA rate hike to the third quarter of 2023, from earlier predicting a 15 basis points increase in the second quarter, a median of 19 respondents showed.

(Polling by Shaloo Shrivastava and Vivek Mishra in Bengaluru; Writing by Swati Pandey; Editing by Sam Holmes)

Australia central bank seen reversing taper decision as lockdowns hit economy: Reuters poll
 

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