AUD 2020-11-17 02:30

RBA Monetary Policy Meeting Minutes - Key Points

In their discussion of international economic developments since the previous meeting, members noted that the global economy was in the early stages of recovery following the largest contraction in decades.

GDP outcomes in major economies in the September quarter had generally been somewhat better than expected after very large declines in activity in the first half of the year.

They noted that, since the onset of the pandemic, consumption, business investment and labour market outcomes had generally been better than initially feared, with significant policy support a key factor during and after the intensive period of lockdowns.

Members discussed the causes and implications of the unusually high rate of household saving in the June quarter. The increase in savings had been due to limits on spending opportunities and strong growth in household disposable income, despite a sharp fall in employment and hours worked. 

Turning to the housing market, members noted that prices had declined over recent months in Melbourne and, to a lesser extent, in Sydney

The Board discussed the outlook for the economy and concluded that, despite somewhat better recent outcomes in Australia, the recovery was expected to be protracted and uneven. The outlook implied a large shortfall in activity and employment from levels that would be consistent with full employment. To provide additional support for the recovery and complement the significant support from fiscal policy, the Board resolved to introduce a further package of monetary measures, namely:

  • a reduction in the target for the cash rate to 0.1 per cent
  • a reduction in the interest rate on Exchange Settlement balances held by financial institutions at the Bank to zero
  • a reduction in the target for the yield on the 3-year Australian Government bond to around 0.1 per cent
  • a reduction in the interest rate on new drawings under the Term Funding Facility to 0.1 per cent
  • the purchase of $100 billion of government bonds of maturities of around 5 to 10 years over the following 6 months.

Members agreed that the focus over the period ahead will be the government bond purchase program. At its future meetings, the Board will closely monitor the effects of the bond purchases on the economy and on market functioning, as well as the evolving outlook for jobs and inflation. The Board is prepared to do more if necessary.