Australia may be out of the coronavirus-driven recession with growth in other parts of the country offsetting Victoria’s woes.
Reserve Bank of Australia deputy governor Guy Debelle told a Senate estimates hearing on Tuesday that growth is more likely to be in positive territory rather than showing a small negative.
Choosing his words carefully ahead of next week’s central bank board meeting, Dr Debelle said the drag on the economy from the COVID-19 lockdown in Victoria may be less than earlier forecast.
The economy sank into recession for the first time in nearly 30 years earlier this year, confirmed by a sharp seven per cent contraction in the June quarter.
Dr Debelle said the RBA’s best guess at the moment is the country is reporting positive growth rather than slightly negative.
“The strength elsewhere in the country was more than the drag from Victoria,” Dr Debelle said.
“Possibly the drag from Victoria was a little less than we guessed back in August,” he added, referring to the central bank’s previous quarterly statement on monetary policy.
The central bank will also release its latest quarterly statement next week.
Treasury secretary Steven Kennedy appeared before senators on Monday, saying the recovery from the biggest economic contraction on record is under way.
Economists still expect the central bank will cut the cash rate, the three-year bond yield target and the term funding facility rate for banks from 0.25 per cent 0.10 per cent at the November 3 board meeting.
There is also speculation the RBA will extend its bond-buying program to five to 10 year bonds in a further attempt to keep market interest rates low, otherwise know as quantitative easing or QE.
Dr Debelle declined to comment on the QE speculation ahead of the board meeting.
Meanwhile, Treasurer Josh Frydenberg has jumped on figures showing consumer confidence has risen for eight straight weeks, claiming they demonstrate his budget is on the side of Australians.
The ANZ-Roy Morgan consumer confidence index grew by a further 1.6 per cent to 99.7 points in the past week, the highest level since March.
The index just below the neutral level of 100 which separates pessimists and optimists.
Confidence rose in the weeks heading into the government’s tax-cutting budget earlier in October, and has extended the run since.
“The budget is our economic recovery plan. It’s our demonstration that we are on the side of Australians,” Mr Frydenberg told his coalition colleagues at a meeting on Tuesday.
ANZ head of Australian economics David Plank said falling COVID-19 case numbers and hopes of a further easing in restrictions have helped to keep confidence on an upward trend.
He said sub-indices suggest people remain cautious about the current economic outlook.
“This may constrain spending in the near-term,” Mr Plank said on Tuesday.
“Confidence in future economic and financial conditions is much more positive, however, holding out the prospect of a recovery in spending if the labour market holds up.”
Commonwealth Bank chief economist Stephen Halmarick agrees the economy is recovering, aided by the government’s “extraordinary” support in the budget, and now with the prospect of a further easing in monetary policy.
“The recovery will be long and uneven, but it is clearly under way,” Mr Halmarick said.
“Australia should continue to outperform most other major OECD economies in recovering from the COVID-19 recession.”