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RBA: Negative interest rates, QE unlikely

Alex Druce
RBA governor Philip Lowe has reiterated that Australia's economic fundamentals remain strong

The economic optimism of Reserve Bank governor Philip Lowe appears unmoved as he prepares for a grilling by federal parliament's House of Representatives economics committee, with the head of the central bank sticking close to his buoyant lines already offered this week.

Dr Lowe's opening remarks at Friday's hearing reiterated that Australia's fundamentals remain strong, and that growth forecasts through to December 2020 remain unchanged even as uncertainty lingers around the true impact of the summer bushfires and coronavirus outbreak.

The governor's belief that the devastating bushfires and the coronavirus will be short-lived stands in stark contrast to Prime Minister Scott Morrison, who expects the the virus alone will have a "significant impact".

The RBA shocked economists on Tuesday when it left its growth outlook for the year unchanged, despite concerns over the economic pain in wait following a torrid summer of fires and, more recently, a coronavirus outbreak.

A 0.2 per cent fire hit to GDP over the previous and current quarters was flagged by Dr Lowe at a speech in Sydney on Wednesday.

Economists remarked the central bank had "surprisingly" little to say about the headwinds presented in recent months after it held cash rate at a record low 0.75 per cent and suggested the economy would continue to improve.

Dr Low on Friday said it remained difficult to asses the likely impacts of the coronavirus, though he again referred to the sharp economic bounce back following the 2003 SARS epidemic as a guide.

Dr Lowe also told the committee that negative interest rates are "extraordinarily unlikely" - even though cuts remain on the table - while alternative measures such as quantatitive easing would only be considered if the cash rate hits 0.25 per cent.