A further cut to Australia’s record low interest rate could be on the cards, with the Reserve Bank governor dropping a hint in a speech.
The Reserve Bank of Australia has hinted at the possibility of another interest rate cut to support the country’s economic recovery from the coronavirus recession.
The RBA has said an increase in the cash rate will not occur for at least the next two to three years or until inflation is within the bank’s target range of 2 to 3 per cent.
The central bank will make its next monetary policy decision in November.
In March, the RBA slashed the official interest rate to 25 basis points as a result of the COVID-19 health crisis. It also implemented bond-buying measures and a term funding facility to ensure the country’s banking sector had access to ample liquidity.
Economists are forecasting an interest-rate cut of 15 basis points could occur at the next RBA monetary policy meeting, which falls on the same day as the Melbourne Cup.
The RBA also noted Australia’s two-speed economic recovery was being exacerbated by Victoria’s continued shutdown, which has hindered the second most populous state’s spending and job numbers.
For the month of August, retail spending in Victoria was down 11 per cent compared with the start of the year, while retail spending across the country increased by 13 per cent over the same period.
The number of jobs in Victoria are down 8 per cent compared with March, with Mr Lowe noting small businesses have been more impacted by the virus than larger corporations.