The Reserve Bank of Australia (RBA) has kept interest rates on hold at a record low of 0.10 per cent.
RBA governor Philip Lowe said while the country’s economic recovery has been stronger than expected, the recent COVID-19 outbreak has interrupted recovery and GDP is expected to decline in the September quarter.
However, Lowe had a very optimistic outlook for next year saying significant policy support from the Government and the ongoing vaccine rollout should help get the nation back on track.
“The experience to date has been that once virus outbreaks are contained, the economy bounces back quickly,” Lowe said.
“Prior to the current virus outbreaks, the Australian economy had considerable momentum and it is still expected to grow strongly again next year.”
Economic consequences of COVID-19
This comes after Prime Minister Scott Morrison and Treasurer Josh Frydenberg held a joint press conference this afternoon to go through the severe economic impact of COVID-19-induced lockdowns.
During that press conference Morrison and Frydenberg said lockdowns will not be able to ease until at least 70 per cent of the Australian population is vaccinated.
Frydenberg said modelling from the Doherty Institute, which is yet to be made public, outlined how the economic damage will ease as the vaccination rate goes up.
With 50 per cent of the population vaccinated the cost to the economy will be $570 million a week. At 60 per cent that drops to $430 million per week, and down to $200 million per week with 70 per cent vaccinated. At 80 per cent, the cost is about $140 million a week.
Instead he said he believes Australians will get the jab because they know it’s the right thing to do.
“Australians understand the challenge, Australians want to return to a life they knew, as far as possible,” Morrison said.
“I have seen Australians respond with courage, determination, and kindness over the past 18 months to get through this. Doing it for the cash, I do not think is what would motivate an Australian.”
Second recession fears
Frydenberg said last month that the most recent lockdowns affecting Sydney, Melbourne and South Australia will “have a hit on the economy”.
“We’ll see that in the future jobs data as well as in the GDP growth numbers,” he told the ABC.
“Our expectation is that these lockdowns are costing around $300 million a day, which is a very high price. And, of course, we’re not out of it just yet.”