RBA forecasts to overshadow rate decision

Economists expect the Reserve Bank to leave the cash rate at a record low 0.25 per cent as the economy struggles with the COVID19 crisis.

JP Morgan Australia chief economist Ben Jarman does not expect a change when the RBA meets on Tuesday after two coronavirus-based cuts in March.

He also expects the bank to reaffirm a 25 basis-point yield target on three-year Australian government bonds.

“There aren’t any other obvious policy levers to be pulled right now given how much already has been done,” Mr Jarman said.

The bank at its emergency meeting in March also decided to introduce a range of quantitative easing measures.

Mr Jarman said there would be more interest in the bank’s economic forecasts, which will be part of its Statement on Monetary Policy, due on Friday.

He expected the bank’s June GDP growth forecast of 2.75 per cent to be revised to about -10 per cent, and the corresponding unemployment rate forecast to be lifted from 5.25 per cent to near 10 per cent.

The unemployment rate inched higher last month to 5.2 per cent.

Westpac chief economist Bill Evans did not expect a rate cut, either.

He believed the cash rate would not be increased until the economy made marked progress towards full employment (4.5 per cent).

The RBA decisions in March will take time to make a difference to the economy, which has been ravaged by the social distancing restrictions designed to slow the spread of the virus.

Industry sectors including tertiary education, hospitality, retail and tourism have laid off thousands of workers.

Job advertisement data published earlier on Monday showed a 53.1 per cent plunge in the number of ads in April.

The federal government’s national cabinet on Friday is due to announce some easing of social distancing restrictions, which may help stimulate economic activity.

Tuesday’s monetary policy decision will be announced at 1430 AEST.

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