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RBA boss flags more rate cuts

Posted on 04/29/2019 | in 深圳桑拿网 | by

The central bank chief, facing his six-monthly grilling in front of the House of Representatives economics committee on Friday, Mr Stevens has backed the federal government\’s stimulus packages, saying the economy would be weaker without them.

深圳桑拿网

The federal government introduced a $10.4 billion fiscal stimulus package in October that included cash handouts to low-income families and pensioners.

Last week, it won parliamentary approval for a new $42 billion fiscal stimulus package which includes more than $12 billion in cash handouts to taxpayers.

“2009 and, to some extent, 2010 would have seen a lower pace of aggregate demand in Australia, absent those measures,” Mr Stevens said.

Even if households saved their handouts, the economy would benefit later.

“That helps them be in a position to expand spending, even if that\’s some way down the track.”

The governor does expect difficult times ahead, saying it was unrealistic to expect anything other than weak conditions in the near-term. But the economy would not be as badly hit as some other advanced economies.

A big drop in interest rates, the fiscal stimulus and a lower exchange rate would support demand, “increasingly so as the year goes on”.

“Australia will come through this episode not unscathed, but will be placed to benefit from this,” Mr Stevens said.

Housing affordability had improved on the back of the bank\’s aggressive 400 basis point cut in the cash rate to a historically-low level of 3.25 per cent. That would have quite a “powerful impact” on the economy.

“If there is a need to use more interest rate stimulus then we can,” he said.

But Mr Stevens was reluctant to give a target figure and would not comment on whether financial markets were correct in pricing an eventual low of 2.0 to 2.25 per cent.

“It is not my present expectation we\’re going to find ourselves at nothing,” Mr Stevens said.

He noted that Australia\’s cash rate was still one of the highest among major economies even at 3.25 per cent with the US\’s target range at zero to 0.25 per cent and Japan\’s benchmark rate at 0.1 per cent.

The effects of interest rate cuts in Australia were only beginning to impact.

“The board is, of course, continually assessing whether the stance of policy is the right one to foster a durable expansion, consistent with the inflation target,” he said.

A recovery in the housing sector would begin later this year as the impact of lower interest rates started to flow through the economy. Households in a reasonable financial situation may start to borrow.

“We have seen quite a tangible pick-up in approvals in housing, particularly for owner occupiers.”

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