Monthly Insights BY THE CURVE TEAM –

With over 100 years of collective financial markets experience behind us, we have created Curve’s monthly insights, highlighting important global economic data and providing in-depth analysis to help you better understand the current economic climate.

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Recession Confirmed as Household Consumption Collapses

  • After a world record run of almost 30 years of uninterrupted growth, Australia is now officially in a recession.
  • There was one sector of the economy that accounted for almost the entire decline in growth over the quarter.
  • That same sector also holds the key to the outlook.
  • This month also saw the first change to monetary policy settings since the RBA’s emergency board meeting back in the middle of March this year.

RBA’s Outlook Highlights Harsh Reality

  • Hopes of a swift recovery from the Covid-19 pandemic are slipping away based on the latest update from the RBA .
  • The second wave of the virus in Victoria is only part of the problem with the scars of the current crisis to be with us for some time.
  • Risks are still skewed to the downside with the RBA’s baseline scenario still looking too optimistic.
  • Despite the current settings of monetary policy remaining unchanged, the RBA is buying government bonds again amid calls for further policy support.

Second Wave Threatens Outlook

  • Australia’s early success in containing the virus is slowly coming undone as community transitions in Victoria start to spread.
  • The RBA remains committed to doing all it can to support the economy and ensure that the price and availability of credit will support any recovery.
  • However, with little room left to have a meaningful impact and its measures still under-utilised, pressure is mounting on the government to steer the economy through the crisis.
  • With the spread of the virus gaining pace and crossing into NSW and Queensland, the outlook for the economy is at the crossroads and the next few weeks will be crucial.

RBA Remains Concerned About the Outlook Without Further Policy Initiatives

  • Containment measures continue to be rolled back and the data suggests that the worst is now behind us.
  • Monetary policy once again remained unchanged over the month with the RBA remaining “committed to do what it can to support jobs, incomes and businesses.”
  • In his appearance before the Covid-19 Parliamentary Committee, Governor Lowe spoke candidly about how much more room monetary policy has left and what else the RBA could do if required.
  • He also voiced concerns over the long run prospects for the economy if unemployment remains high for too long and if structural issues facing the economy weren’t addressed.

A big unknown hanging over the outlook

  • The focus is quickly shifting from the containment of Covid-19 to winding back the containment measures and opening up the economy.

  • Monetary policy remained unchanged over the month with the RBA remaining “committed to do what it can to support jobs, incomes and businesses”.

  • In their quarterly Statement on Monetary Policy the RBA revealed their latest forecasts as well as other scenarios.

  • Given the unprecedented nature of recent events, there is considerable uncertainty over the outlook with the RBA facing a great unknown.

Slower for Longer

  • The outlook for the economy continues to develop as the fight to contain Covid-19 remains the focal point.
  • At their emergency meeting the RBA cut the cash rate to the lower bound of 0.25% and commenced quantitative easing to support the economy.
  • Volatility across markets has continued with the focus on the health fight, not the longer-term implications for the economy.
  • While the near-term outcomes will be determined by the health crisis, longer term implications are starting to emerge.