Daily Commentary BY THE CURVE TEAM –


4th of August, 2020

The RBA is once again expected to maintain its current policy stance.

Since March the cash rate, 3-year government bond target and Term Funding Facility have been sustained. Speeches by Governor Lowe and Assistant Governor Kent over the last two weeks give every indication that the RBA will maintain these policies settings.

This is in spite of the stage 4 containment measures being imposed in Victoria. These are expected to hit the economy hard and has even spurred talks of re-amending JobKeeper beyond September.

At the moment eligibility for the wage subsidies are set to be more stringent, with businesses needing to demonstrate a 30% decline in revenue for the quarter leading into September rather than a single month. This is subject to be unwound to a degree so businesses who are hit hard during the second wave can still access the scheme. Alongside this, there is talk that businesses will also be offered grants to compensate for the state-wide lockdowns.

Over the last few months and in Governor Lowe’s speech two weeks ago, the RBA have emphasised the role fiscal stimulus and structural reform will need to play going forward. Further monetary stimulus from the RBA can only do so much for the economy as lockdowns are reimposed.

Testament to this was credit data out last week, which showed aggregate credit declined for a second consecutive month. Even with the swathes of liquidity provided by the RBA, it doesn’t necessarily lead to more lending or activity, especially as lockdowns mean there are physical restrictions to economic activity.

Also out today is retail sales data for Q2. Over the second quarter lockdowns across the country were imposed. Accordingly, sales are expected to decline 1.4% from the previous quarter, which would amount to a 0.25%-point fall in Q2 GDP.

Josh Stewart

Client Relationship Manager