Australia Interest Rate1990-2020 Data | 2021-2022 Forecast | Calendar | Historical

The Reserve Bank of Australia discussed the case for additional monetary easing to support jobs and the overall economy, including slashing the cash rate toward zero and buying longer-dated government bonds, the central bank's October meeting minutes showed. "Members noted that the larger balance sheet expansions by other central banks was contributing to lower sovereign yields in most other advanced economies than in Australia," it added. Members considered the nature of the forward guidance, agreeing to place more weight on actual, not forecast, inflation in its decision-making. "Members indicated that they would also like to see more than just progress towards full employment before considering an increase in the cash rate, as the board views addressing the high rate of unemployment as an important national priority."

The Australian financial system is in a strong position to withstand the country's large economic contraction and support the recovery, but risks are elevated, the Reserve Bank of Australia said in its biannual Financial Stability Review. "These risks would be exacerbated by a weaker-than-expected economic recovery, for example stemming from further setbacks on the health front or international political tensions," it added. However, stress tests of the national banking system indicate that banks would remain above their minimum capital requirements even if the economic contraction is substantially more severe than expected. Meantime, the central bank expects business failures to rise and loan impairments to increase going forward. The potential for mortgage losses for lenders is also higher if distressed home sales increase.

The Reserve Bank of Australia left the cash rate unchanged at a record low of 0.25 percent during its October meeting, as widely expected. Policymakers reiterated their commitment to do what it can to support jobs, incomes, and businesses in Australia. Its actions, including last month's decision to expand the Term Funding Facility to around AUD 200 billion at a fixed rate of 25 bps for three years, are keeping funding costs low. The Committee said that the national recovery is likely to be bumpy and uneven and it will be some time before the level of output returns to its end 2019 level. The board added that it continues to consider how additional monetary easing could support jobs as the economy opens up further. Policymakers reaffirmed its views to maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3%.

The Reserve Bank of Australia is assessing various monetary policy options to meet inflation and employment targets, amid a gradual and uneven recovery from the prolonged COVID-19 crisis, Deputy Governor Guy Debelle said in a speech. The first option is foreign exchange intervention but it is not clear whether this would be effective as the Australian dollar was aligned with fundamentals, he added. The second option is to buy bonds with maturities beyond three years to help lower longer-dated government bond rates. "A third option is to lower the current structure of rates in the economy a little more without going into negative territory". A fourth option is negative rates that in the short term it can contribute to a lower exchange rate but in the medium-term effectiveness can wane including through the effect on the financial system.