The Reserve Bank has gone all-in on propping up the economy by cutting the official cash rate to 0.1 per cent – the lowest it has ever been in Australia.
The cut from the previous record-low of 0.25 per cent is predicted to remain until 2024.
The RBA also announced a quantitative easing move, by buying $100 billion worth of Australian Government bonds over six months in an effort to boost inflation.
Mr Lowe also said the measures were largely designed to help with employment, which he predicts to peak at 8 per cent and fall to around 6 per cent by 2022.
“Encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago,” he said.
“Even so, the recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus.”
BIS Oxford Economics chief economist Sarah Hunter told the ABC the cut was not a surprise.
“The easing that has been implemented so far has already had a significant impact on the housing market,” she said.
“House prices are now trending up nationally and the lending data suggests this will continue in the near term.”
Reserve Bank governor Philip Lowe said interest rates were unlikely to go below zero because he says that would fail to stimulate spending.
“While a negative rate might lead to a helpful depreciation of the Australian dollar, it could impair the supply of credit to the economy and lead some people to save more, rather than spend more,” he said.
“We’ve done as much as we can on interest rates and the focus now is really on the quantitative asset purchases.”