Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Australian central bank's policy optimism tested by lockdowns

EconomyJul 19, 2021 10:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Two women walk next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz

By Wayne Cole

SYDNEY (Reuters) -Australia's central bank was counting on the economy to keep surprising with its strength when trimming stimulus earlier this month, but might now be forced to reconsider as coronavirus lockdowns spread across the country.

Minutes of its July 6 policy meeting, showed the Reserve Bank of Australia (RBA) policy Board considered economic outcomes had been "materially" better than expected, particularly in the labour market.

As a result, it decided that from September it would reduce the amount of bonds it was buying every week to A$4 billion ($2.94 billion), from the current pace of A$5 billion.

However, activity has since taken a turn for the worse as lockdowns in the states of New South Wales and Victoria shut shops, restaurants and construction sites.

Restrictions in NSW have been extended to the end of July, while Victoria on Tuesday announced another seven days of lockdown and state of South Australia decided to lock down for a week.

The impact was evident in ANZ's latest survey of consumers released on Tuesday which found a sharp deterioration in sentiment on the national economic outlook.

The overall confidence index dropped 5.2% last week, the sharpest drop since March 2020, with buying intentions for major items taking a particularly hard hit.

Analysts at CBA suspected the blow might be bad enough for the RBA to reverse its decision to trim bond buying and instead maintain the current pace of A$5 billion a week.

"The evolving situation in Greater Sydney and Victoria will lead to a contraction in Q3 GDP," warned CBA senior economist Belinda Allen.

"The scale is still being assessed given the uncertainty over the length of the lockdown," she added. "The more contagious nature of the Delta variant means that a more cautious reopening may take place."

The RBA had already been cautious about the outlook for wages and inflation, noting neither had shown the strength evident in employment and consumption.

"It will require the labour market to be tight enough to generate wages growth that is materially higher than it was at the time of the meeting," the minutes showed.

"The Bank's central scenario for the economy is that this condition will not be met before 2024."

($1 = 1.3626 Australian dollars)

Australian central bank's policy optimism tested by lockdowns
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email