The Reserve Bank has kept the official cash rate at 0.25 per cent at its July meeting as Melbourne braces itself for a hard border and another round of coronavirus lockdowns.
With the associated economic uncertainty of the pandemic, economists don’t expect the rate to move up or down any time soon.
RBA governor Philip Lowe said in his statement the economy was reeling from the pandemic.
“The global economy has experienced a severe downturn as countries seek to contain the coronavirus,” he said.
“Many people have lost their jobs and there has been a sharp rise in unemployment.”
“Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed.”
“Despite this, the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus,” Dr Lowe’s statement said.
According to the governor, fiscal and monetary support will be required for some time and the board won’t be increasing the cash rate target until employment and inflation figures improve.
“While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely,” he said.
“There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country.”
Despite some gradual economic improvement, this fresh outbreak of the virus in Melbourne is a stark reminder that the nature and speed of recovery is very much uncertain.