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where next for RBA
25 Mar 21

Where Next for RBA

With government stimulus measures and supports soon concluding, consumer spending behaviour will inevitably change, but it is expected the RBA will continue to maintain a steady approach regardless.

In the last monthly monetary policy statement, the RBA announced the cash rate would remain at 0.1%, maintaining the monetary policy measures implemented last year to support the economy through the pandemic.  So, what the RBA will do next?

Australia’s economic recovery is progressing better than expected, and the progress around vaccines is certainly contributing to this. Until wages increase in line with normal pre-COVID rates, it’s unlikely the cash rate will increase considerably. In fact, the report stated that the Board would not increase the cash rate until actual inflation maintains a sustainable rate, of around 2% to 3%.

The RBA is working on the scenario that GDP will return to its end of 2019 level by the middle of 2021 and grow by 3.5% through to the end of 2022. According to the report, ongoing support is key – ‘the Board remains committed to maintaining highly supportive monetary conditions until its goals are achieved. Given the current outlook for inflation & jobs, this is still some way off. The current monetary policy settings are continuing to help the economy by lowering financing costs for borrowers, contributing to a lower exchange rate than otherwise, supporting the supply of credit needed for the recovery and supporting household and business balance sheets.’

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