January 16, 2021

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RBA tipped to slash interest rates to record low amid coronavirus

2 min read
<p>The Reserve Bank is tipped to make an emergency rate cut today as coronavirus crisis continues to batter the economy.</p>

The Reserve Bank is tipped to make an emergency rate cut today as coronavirus crisis continues to batter the economy.

Interest rates are already sitting at a record low of 0.75 per cent, although economists believe they could drop as low as 0.5 per.

Expectations climbed after the US indicated rate cuts were on the way, however the government is also looking at other ways to stimulate the economy.

Prime Minister Scott Morrison has signalled work is well under way on a response to the financial impacts of the coronavirus, as he held a meeting with central bank chiefs.

"This is a health crisis not a financial crisis, but it is a health crisis with very significant economic implications," Mr Morrison told parliament on Monday

"We'll be focusing on ensuring that we keep Australians in jobs, we keep business in business and we keep investment flowing during what will be a very challenging time for the Australian economy."

Mr Morrison said when the health crisis was over, there would be a bounce back for the Australian economy.

The tourism sector in particular faces losses running into billions of dollars due to the travel ban on Chinese visitors in an attempt to contain COVID-19.

The education sector is also bearing the brunt of travel restrictions.

Treasurer Josh Frydenberg, who also attended the meeting with RBA officials, told parliament Australia was well placed to deal with the impacts from the virus.

Countries with confirmed cases of coronavirus.

"Our fiscal response will be considered, it will be responsible and it will be targeted," he said.

Shadow treasurer Jim Chalmers is open to a stimulus package to assist the impact of the virus, but argues the economy has been in desperate need of support for some time.

The national accounts for the December quarter are due on Wednesday, which will not include the full impact of summer's devastating bushfires either.

Economists at this stage expect the economy grew by a slim 0.4 per cent in the quarter, with some having marked down their predictions in the face of weak construction and business investment data last week.

While this will lift the annual rate to 2.0 per cent from 1.7 per cent as of the September quarter, it would still leave growth well below its long term trend.

Economists will finalise their forecasts after business, government spending and international trade figures early next week.

 

Source: 9News https://www.9news.com.au/national/rba-emergency-rate-cut-tipped-as-coronavirus-crisis-affects-economy/bd6c6b95-49b0-4669-80f8-62e1ab976852

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