Australia’s central bank yesterday expanded a lending facility for banks as it kept key policies unchanged, while signaling a renewed willingness to explore additional measures to boost an economy still mired in recession.
“The board will maintain highly accommodative settings as long as is required,” Reserve Bank of Australia Governor Philip Lowe said after keeping both the cash rate and three-year yield target unchanged at 0.25 percent.
In addition to the key final paragraph of guidance, Lowe added that the central bank “continues to consider how further monetary measures could support the recovery.”
Photo: Reuters
Under the increased term funding facility, banks would have access to additional funding equivalent to 2 percent of their outstanding credit, at a fixed rate of 25 basis points for three years.
They would be able to draw on this up until the end of June next year, the central bank said.
Lenders have so far drawn A$52 billion (US$38.5 billion) and the change brings the total available to about A$200 billion, Lowe said.
BOND BUYING
The central bank is coordinating with the government’s wide-ranging stimulus program by keeping rates near zero and purchasing bonds to keep borrowing costs down across the economy.
The central bank has bought about A$60 billion of government securities since it initiated the bond-buying program in March and Lowe said more would be undertaken as needed.
Lowe also highlighted the appreciation of the Australian dollar and that it was now near a two-year high.
The currency has surged almost 30 percent from a March low, causing greater discomfort for the nation’s exporters. Negative rates have been floated as an option to help take pressure off the currency.
Westpac Banking Corp chief economist Bill Evans said that the “risk/reward tradeoff” of such a move is attractive given “the currency effect on a small open economy with large foreign debt.”
JOBS AT RISK
While parts of Australia have reopened for business, Victoria’s COVID-19 outbreak and renewed lockdown have damaged confidence and shut state borders.
The central bank said that, as a result, unemployment is set to rise to 10 percent later this year and the national economy is unlikely to grow in the third quarter.
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