Daily Commentary BY THE CURVE TEAM –

Lowe Strike a Different Chord

16th of March, 2021

Governor Lowe highlighted an issue less prevalent in the board’s meetings in his speech at the Melbourne Business Analytics.

As per their mandate, employment, wages and inflation are the focal points of RBA meetings. Yesterday, in the theme of the conference, Lowe highlighted the importance of business investment for the economy to recover.

He noted that although other components of the economy, notably GDP and employment, had recovered much of the losses from covid, business investment still lagged. This was more concerning given it was already below long run averages going in to covid.

Sustainable long-term growth and improvement in living standards is only possible with increased productivity. Investment, especially in ‘IT, digitisation and data science’ as Lowe cited, is the means to achieve this.

The RBA Minutes for the March meeting will be released today where we will likely see the same tune as recent meetings. Also coming up is the Federal Reserve’s meeting, who are also expected to hold the line of la monetary policy in the face of improving market expectations.

Overseas, more European countries (France, Germany and Italy) have halted use of the AstraZeneca vaccine with claims that it increases the likelihood of blood clots. This is despite a review of 17 million people produced by AstraZeneca and European health authorities finding no increased risk.

With alternative vaccines available, the doubts over the vaccine have had little effect on markets. In a similar vein, recent covid cases in Australia have had no effect on markets as Australia has a recent track record of containing these cases.

Josh Stewart

Associate - Money Markets