- The Reserve Bank of Australia (RBA) has addressed the country after announcing an emergency stimulus package.
- Governor Phillip Lowe said Australia would suffer “significant job losses’ due to the coronavirus crisis.
- The measures the RBA has now implemented, which include another rate cut to 0.25%, come as the government tries to secure jobs and incomes amid the economic impact of the pandemic.
- Visit Business Insider Australia’s homepage for more stories.
The Reserve Bank of Australia (RBA) is facing facts.
Having laid its cards on the table in way of a new four-part stimulus package, the RBA addressed the nation on Thursday afternoon. While retaining the kind of upbeat tone you would expect from the central bank charged with ensuring Australia’s financial stability, Governor Phillip Lowe was also candid.
“I’m not able to provide you with an updated set of economic forecasts, the situation is just too fluid, but we are expecting a major hit to economic activity and incomes in Australia that will last for a number of months. We’re also expecting significant job losses,” he told a press conference.
“The scale of those losses will depend upon the ability of businesses to keep workers on during this challenging period. We saw during the global financial crisis how flexibility in working arrangements limited job losses and this benefited the entire community. And I hope the same is going to be true in the months ahead.”
The predicted job loss echoes the latest Westpac forecast and marks a mighty change of tune for the RBA which has consistently talked up an Australian economy which has just as consistently underdelivered in recent years.
Of course, that’s not entirely the RBA’s fault – economic forecasting is inherently difficult and central banks have a tendency to present the economies they oversee in a good light.
That’s not to mention the fact the current coronavirus crisis has blindsided many.
“It’s become a major economic problem and it’s having deep ramifications for financial systems right around the world,” Lowe said. “The closure of borders and social distancing measures are affecting us all and they’re changing the way that we’re living. Understandably, our communities and our financial markets are both having trouble dealing with a risk they haven’t seen before, and a rapidly unfolding situation.”
To overcome it, or “build a bridge” over it as Lowe has become fond of saying, the RBA has announced a string of new measures aimed at ensuring liquidity in financial markets – in other words, that money keeps flowing through the economy.
“Rightly, the focus is on supporting businesses and households who will suffer major hits to their incomes,” Lowe said. “It’s increasingly clear that further help will be required on this front, and the Australian Government has indicated that additional policy measures will be announced shortly.”
Those measures could come as part of a second stimulus package the Federal Government has promised to hand down before its May budget. While details are yet to be confirmed, it’s expected to contain more policies aimed at securing jobs and incomes.
While Australia waits on those exact measures to be revealed, Lowe said it’s important not to lose sight of reality.
“We also need to look to the other side when things do recover. When we do get to that other side, all those fundamentals that have made Australia such a successful and prosperous, and fantastic country will still be there,” he said. “I think we need to remember that.”
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