Australia’s central bank on Tuesday cut its benchmark interest rate by 0.15 of a percentage point to a record low 0.10% in a bid to lift the economy from a pandemic-induced recession.
The move was the first since March when the Reserve Bank of Australia board made two cuts, of a quarter of a percentage point each, two weeks apart.
The Reserve Bank also announced it would buy 100 billion Australian ($70 billion) of government bonds of maturities of around five-to-10 years over the next six months.
The bank is prepared to buy bonds in whatever quantity was required to achieve a 3-year yield target of 0.1%, Reserve Bank governor Philip Lowe said.
“Today’s decision reflects the Reserve Bank Board’s commitment to do what we reasonably can, with the tools that we have, to support the recovery of the Australian economy. The board views addressing the high rate of unemployment as a national priority, and it wants to do what it can do to support job creation,” he told reporters in Sydney.
Recent economic data have been better than expected and the near-term outlook was better than it was three months ago, he said.
The board said the global economy had been recovering from the initial virus outbreaks, with the recovery most advanced in China.
Output in most countries remains well short of pre-pandemic levels and recent virus outbreaks pose a downside risk to the outlook, particularly in Europe, Lowe said.
The Australian economy contracted during the first half of the calendar year, although Lowe said official data will reveal growth in the September quarter.
Australian Treasurer Josh Frydenberg told reporters the board’s moves “complements” the government’s support for jobs creation and for the country’s economic recovery.
The Australian economy was beginning to recover especially since the nation’s second-largest city, Melbourne, emerged last week from a 111-day lockdown.
Australia on Sunday recorded its first day without a single-case of COVID-19 community transmission since June 9.
The bank expects the economy will grow by 6% in the current fiscal year through June 2021 and 4% in the following year.
It also has forecast that Australia’s jobless rate will peak at less than 8%, down from a previous estimate of 10%.
Inflation is expected to be 1% in 2021 and 1.5% in 2022.
Lowe said the bank would not lift its benchmark cash interest rate until inflation reaches its target band of between 2% and 3%.