RBA announced only weeks ago that it planned to start tapering its quantitative easing program from mid-September, however HSBC global economist Paul Bloxham said he believes it will “back away” from those plans, given that Greater Sydney is now in lockdown until at least 31 August.
“[RBA’s taper plans were] before the Sydney COVID-19 outbreak had gained momentum, which led to an extended lockdown in New South Wales (NSW) and shorter, temporary lockdowns in Victoria and South Australia, that have now ended,” Mr Bloxham said in a new report.
“It is likely that the lockdown in NSW, which started on 23 June and is scheduled to run until 31 August (nine weeks), will see GDP contract in 3Q21. We expect growth to stall in 2H21, before the vaccine rollout supports a pick-up in late 4Q21 and in 2022.
“We expect the RBA to back away from its previous plans to taper its QE in mid-September.
“We expect the RBA to continue to note it does not expect to lift the cash rate until 2024 at the earliest.”
Mr Bloxham noted that HSBC expects the effects to be “far smaller” than the initial outbreak in early 2020, especially given that lockdowns are currently only in place in NSW.
The report assumes that the Victorian economy will rebound throughout August and September on the basis that other states remain open throughout that time.
