The RBA’s historic quantitative easing program will see it buy $100 billion of five and 10-year bonds over the next six months, while rates have also been slashed to their historic low of 0.1 per cent as it seeks to fulfil its mandate to achieve full employment.
But while the move has been met with bemusement from some corners, Governor Lowe has said that the previously unprecedented move was always going to be necessary as Australia continues to feel the impact of the COVID-19 recession and Victoria’s lockdown.
“Our decision to implement this policy package today is really about the outlook for the unemployment over the next two years,” Governor Lowe told media.
“…I think we still would have been making this adjustment in policy even if we hadn’t had the lockdown in Victoria because the outlook for the labour market requires further action. We can do better than have the unemployment rate sit in the six and seven for a few years.”
It’s a stark change of thinking for the RBA and Governor Lowe, who had warned that monetary policy was exhausted and that fiscal stimulus would be required for the economic heavy lifting going forward – but Governor Lowe also stressed that the bank’s decision was not a reflection on the measures contained within the budget.
“This is not a judgement on the government’s fiscal policy,” Governor Lowe said.
“I think the government’s strategy is the right one, through the combination of income transfers, incentives to the private sector and direct job creation – that together is going to get people into jobs and what we’re doing is supporting and supplementing the government’s efforts…I think the government is on the right track and we want to be supportive of their efforts to get the unemployment rate down.”
