RBA Lowe: Aussie economy needs stimulus

Philip Lowe, the governor of the Reserve Bank of Australia, is giving a speech on “From Recovery to Expansion” at the Australian Farm Institute Conference in Toowoomba, Queensland.

Key comments

• Says premature to be considering ceasing bond purchases.
• Says bond buying has lowered funding costs across economy, contributed to lower A$.
• Options include another A$100 bln programme, scaling back or spreading out purchases.
• Says on 3-year yield target, board has considered range of possible scenarios.
• In some scenarios conditions for 2024 rate rise could be met, in others not.
• Central issue is the probability of cash rate increasing over 3-year window.
• Board wants to see recent recovery transition into strong and durable economic growth16-Jun.
• Says economy still in recovery phase, some way to go yet.
• Says inflation pressures remain subdued and are likely to remain so.
• Says wages growth subdued as firms focus on curbing costs.
• Many firms relying on non-wage strategies to retain, attract staff.
• Whether households spend their built up savings a major uncertainty.
• Says watching build up of household debt, bank lending standards.
• Says recent pick-up in business investment is welcome, but fair way to go.

AUD is unchanged so far.

The impact of his words were unlikely to move markets considering the ranges seen overnight due to the Federal Reserve’s hawkish surprise and ahead of Australia’s May jobs report that is due at 11:30am Syd/9:30am Sing.

With respect to the jobs data, analysts at Westpac agree with the median forecast for employment to have risen by 30k.

”However, we expect the unemployment rate rose from 5.5% to 5.7% (market consensus is 5.5%) due to a rebound in participation (66.3% versus 66.0% in April).”

About Lowe

Philip Lowe replaced Glenn Stevens as governor of Australia’s central bank. Lowe was the Deputy Governor of the Reserve Bank of Australia, a position he held since February 2012.