The Reserve Bank has pushed ahead with plans to scale back its extraordinary monetary stimulus despite Sydney’s prolonged lockdown, citing an expected strong economic recovery once restrictions ease.
In a move that surprised the market, the central bank said it would proceed with plans to reduce its weekly bond purchases from $5 billion to $4 billion per week, despite the huge economic cost of lockdowns.
“Prior to the current virus outbreaks, the Australian economy had considerable momentum, and it is still expected to grow strongly again next year,” governor Philip Lowe said in his post-meeting statement.
“The economy is benefiting from significant additional policy support and the vaccination program will also assist with the recovery.”
The overnight cash rate remained unchanged at 0.1 per cent.
The RBA wants to see inflation sustainably between its 2 per cent and 3 per cent target band before lifting the cash rate above its current historic low, which Mr Lowe said was not expected until 2024.
The central bank had widely been expected by the market to delay the $1 billion reduction in light of an expected 2 per cent 3 per cent economic contraction in the three months to September.