Improved economic outlook thanks to vaccines: RBA Feb 9, 2021

RBA PICTURE

The Reserve Bank of Australia (RBA) believes the outlook for the global economy has improved thanks to the development of COVID-19 vaccines.

After its first meeting for 2021, the RBA found that Australia’s economic recovery has been stronger than was expected. Recent months have seen strong retail spending, a declining unemployment rate and the recommencement of deferred loan repayments. 

The Bank expects Australia’s GDP will hit its pre-COVID levels by the middle of 2021. 

RBA Governor Phillip Lowe said this recovery has been strengthened by positive health outcomes (including the control of COVID-19 outbreaks) and monetary support. 

“While the path ahead is likely to remain bumpy and uneven, there are better prospects for a sustained recovery than there were a few months ago,” Governor Lowe said.

“That recovery, however, remains dependent on the health situation and on significant fiscal and monetary support.”

During its first meeting for 2021, the RBA considered a number of scenarios related to COVID-19 and the current vaccine rollout. 

While positive results on the health front could boost consumer spending and investment, any negative vaccine outcomes will delay the current economic recovery and expectations for employment growth. 

The Bank is therefore maintaining its supportive monetary policy until its inflation and wage growth goals are achieved. It left the cash rate on hold at 0.1%.

The RBA also committed an extra $100 billion to buying government bonds when the current bond-buying program ends in April. These purchases will ensure the continuation of the RBA’s monetary support for the Australian economy during its recovery.

Government support, such as the JobSeeker Coronavirus Supplement and JobKeeper payments, are due to end next month. The RBA will be watching the impacts this has on unemployment and consumer spending closely.

“An important near-term issue is how households and businesses adjust to the tapering of some of the COVID support measures and to what extent they will use their stronger balance sheets to support spending,” Dr Lowe said.

The RBA will not increase the cash rate from 0.1% until inflation reaches 2-3%. It does not expect this to occur until at least 2024.

Talk to Intrust360° about paying down your mortgage!
If you’re interested in taking advantage of the record-low interest rate, talk to Intrust360° about the benefits of paying down your mortgage to pay off your home loan quicker! Give them a call on 1300 001 360, or book an appointment online.

Intrust360° is our financial planning business (its legal name is IS Financial Planning Pty Ltd ABN 64 143 707 439). It’s a wholly owned subsidiary of IS Industry Fund Pty Ltd ABN: 45 010 814 623. It’s also a corporate authorised representative of Link Advice Pty Limited ABN: 36 105 811 836 | AFSL: 258145 | Corporate Authorised Representative Number: 379207. M1.13.21.3

SHARE THIS POST: