Australia Seeks the Goldilocks Exit From Stimulus
Scale back easing without tightening. Boost wage growth but avoid runaway inflation. It’s a delicate balance.
Stay Lowe.
Photographer: Brendon Thorne/BloombergAustralia has taken a small step toward dismantling part of the stimulus it unleashed to fight Covid-19. This is no rush for the exit by the Reserve Bank, once the envy of the world for presiding over a three-decade run without a recession. Interest rate increases are years away.
As financial markets and the global economy cratered last year, the RBA introduced several important measures: cutting rates to near zero, capping the yield on three-year government debt and embarking on quantitative easing. On Tuesday, the bank opted not to extend its yield control measures to a bond maturing in November 2024. The Reserve Bank also finessed its QE program, outlining plans to slow its bond purchases to A$4 billion ($3.03 billion) a week starting in September from A$5 billion currently. It will review the program in November. While Governor Philip Lowe lauded QE’s role in supporting the economy, he said that the RBA “is responding to the stronger-than-expected economic recovery and the improved outlook,” according to a statement.