Australia’s central bank expects the economy to contract by 6 per cent this year and unemployment to peak at 10 per cent as businesses shut to curb the spread of the novel coronavirus.
The Reserve Bank of Australia (RBA) cut interest rates twice in March to a record low 0.25 per cent and launched an unlimited quantitative easing program to keep borrowing costs low for banks and consumers.
The economy is on course for its worst recession ever, and its first in 30 years.
In Friday’s quarterly statement on monetary policy, the RBA repeated the board was committed to do what it can to support jobs, incomes and businesses as the government finalises plans to fully restart the economy by July.
It expects the unemployment rate to hit 10 per cent by June and remain around 7.5 per cent through 2021.
The inflation rate is expected to turn negative in the June quarter before turning mildly positive by year-end.
The RBA said the speed and timing of the economic recovery is very uncertain beyond the next few months but held out hope of a faster recovery if social distancing measures are relaxed a “little sooner.”
With fewer than 20 new infections reported each day, Prime Minister Scott Morrison and state and territory leaders are discussing ways in which restrictions will be eased and when.
“In the context of these extraordinary times and consistent with its broad mandate to promote the economic welfare of the people of Australia, the Reserve Bank will continue to play its role in building the bridge to the time when the recovery takes place,” Governor Philip Lowe said in an accompanying statement.