Energy News

Much has changed in the world since we last met in February. We have experienced a global pandemic, the biggest peacetime contraction in the Australian economy in nearly a hundred years and extraordinary monetary and fiscal policy measures. This all means that many of the challenges we face today were hardly imaginable just six months ago. Economic forecasting is very difficult at a time like this, but the RBA released its regular economic update last Friday in the Statement on Monetary Policy. I will begin by highlighting some of the main points from this update and then turn to the policy response. We do not yet have the GDP data for the June quarter, but it will show the biggest economic contraction in many decades, likely to be around 7 per cent. If there is any good news to be found here, it is that this decline is not as large as initially feared. Similarly, while the labour market outcomes have been poor, they have not been as bad as expected. Hours worked were initially expected to fall by a staggering 20 per cent over the first half of this year. The actual fall has been around half of this, largely due to Australia's initial success in containing the virus and the earlier-than-expected easing of some restrictions. Looking forward, there is a high degree of uncertainty about the outlook and our economic recovery depends upon how successful we are in containing the virus. In our baseline scenario, we are expecting the Australian economy to contract by around 6 per cent this year, and then grow by 5 per cent next year and 4 per cent in 2022. It is possible that we will do better than this if there is near-term success in containing the virus or there are medical breakthroughs. On the other hand, if we were to see further setbacks in containing the virus, the recovery would be delayed even further. Given this uncertain outlook, we should be prepared for a recovery that is uneven and bumpy. The recovery is also likely to be more drawn out than was initially expected despite the downturn being less severe than expected. There are a few factors at work here. The most obvious is the outbreak in Victoria. At a personal level this is very distressing, and on behalf of the staff of the RBA I extend best wishes to everybody in Victoria. And on the economic front, we expect the outbreak will reduce GDP growth in the September quarter by at least 2 percentage points. This will broadly offset the recovery that has been taking place in most other parts of the country. As a result, we ar tweet at 7:47pm: RBA Governor Lowe: Conditions For Rate Rise Not Likely To Be Met For At Least Three Years - Board's View Best Course Of Action Is To Continue With Current Package tweet at 7:46pm: RBA Governor Lowe: Board Considered Possibility Of Undertaking Regular Program Of Bond Purchases - Have Not Ruled Out Separate Bond Buying Program, Or Other Adjustments To Mid-March Package tweet at 7:46pm: RBA Governor Lowe: Baseline Forecast For Unemployment To Increase, Reaching Around 10% Later This Year

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