The Reserve Bank will raise another $ 100 billion to buy government debt after announcing that the labor market does not expect strong wage growth for Australian workers until at least 2024

In a surprise move that helped ease the strain on the Australian dollar, the RBA board decided Tuesday to double its bond-buying program – a key component of its quantitative easing policy – by buying government and federal debt through at least September

The bank has so far spent $ 52 billion on purchases of government and federal bonds with this $ 100 billion program due to end in April that has had growing speculation in the financial markets about the RBA’s next move led

RBA Governor Philip Lowe says the bank is unlikely to be able to raise interest rates through 2024Credit: Rhett Wyman

By September, the bank will own $ 200 billion worth of government bonds with about 80 percent of that federal debt

This is on top of the nearly $ 200 billion cheap line of credit granted to commercial banks to pass on to small and medium-sized businesses, and at a record low of the official liquidity rate of 01 percent, the bank kept the cash rate at 01 percent Tuesday

Governor Philip Lowe said the nation’s economic recovery is “in full swing” and stronger than expected, but risks lay ahead, including the impact of the federal government’s JobKeeper program and the March COVID add-on payment to welfare recipients

While the bank expects the economy to return to pre-pandemic size by the middle of this year, it would take much longer for inflation and wage growth to come close to what the RBA wants

Dr Lowe said the RBA will not raise interest rates until actual inflation is sustained within its target range of 2-3 percent that would require wage growth to be “material” higher than it is currently

â ???? This will require significant job growth and a return to a tight labor market. The board expects these conditions to be met in 2024 at the earliestâ ????

The RBA will release new economic forecasts on Friday, but Dr Anticipating that, Lowe revealed that the bank expects economic growth of 3.5 percent this year and next, which is slightly below November’s projections for 5 percent and then 4 percent growth, but the recession is now expected to be in 2020 will be flatter than originally feared

Westpac chief economist Bill Evans said the RBA will not stop its $ 100 billion bond purchase program, projecting the bank to add at least another $ 100 billion later this year and through 2022 will issue two separate tranches

EY chief economist Jo Masters said the Reserve Bank is now on track to expand its balance sheet to 30 percent of Australia’s GDP as it continues to prop up the economy

“The expansion of the quantitative easing program will continue to support Australia’s stronger than expected economic recovery by lowering financing costs, contributing at a lower than usual exchange rate and supporting the supply of credit”, a ???? she said

The markets reacted positively to the RBA’s move, with the ASX200 gaining 0.3 percent immediately after the announcement, while the Australian dollar fell 0.3 cents against the US dollar

While the labor market has improved in recent months, the Reserve expects the unemployment rate to still be 5.5 percent by the end of next year

Data from the Australian Bureau of Statistics on Tuesday showed a 1In the fortnight ended March 16, January, the number of payrolls across the country rose 3 percent

Despite this increase, the number of jobs on corporate payrolls is still a full percentage point lower than the year before the coronavirus hit. They are 43 percent less than in mid-March, and much of the country has been banned >
Bjorn Jarvis, head of labor statistics at ABS, said payrolls had increased in all states and territories

â ???? The challenge with new data is being able to distinguish between changes in the economy and regular seasonal changes. Annual comparisons are a useful way of accounting for seasonality until we have enough data to get seasonally adjusted numbers he said

Accommodation (minus 147 percent), IT (minus 131 percent) and general and vocational training (minus 13) 8 percent) have still declined significantly since mid-March

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RBA, asx news

World news – AU – RBA keeps interest rates stable and extends bond purchase program by US $ 100 billion

Source: https://www.theage.com.au/politics/federal/rba-holds-rates-steady-at-first-meeting-of-the-year-20210202-p56yre.html