Deputy Reserve Bank governor Guy Debelle has indicated lower interest rates are possible in Australia without going negative, but he says the economic downturn could be past its worst.
During an address to the Australian Industry Group, Mr Debelle said the central bank had four policy options should the economy need a further boost.
These are extending its bond buying program to longer maturing issues, foreign exchange intervention and negative interest rates.
Another option is to the lower the current structure of interest rates in the economy, both in terms of the target for government bond yields and the borrowing rate the RBA offers to banks from the current 0.25 per cent.
“It is possible to further reduce these interest rates,” he said in his speech on Tuesday.
But he emphasised these were all just options.
“I am not saying anything new on the likelihood of any of those,” he said in a subsequent Q&A session.
“We have a meeting every month and each meeting we need to assess the range of monetary options to support the economy.”
There has been speculation the central bank could ease the cash rate from its already record low of 0.25 per cent to 0.10 per cent, possibly coinciding with the handing down of the federal budget on October 6, the date of the next meeting.
The deputy governor said the economy had come off its trough seen in May.
“So it is plausible that the worst is behind us but the recovery from here is potentially more of a slow grind,” he said.
He said while last week’s fall in the unemployment rate to 6.8 per cent was better than expected, the recovery in the labour market was likely to be “bumpy and uneven”.
“We still expect the unemployment rate to rise from here,” he said.
New data on Tuesday showed payroll jobs fell 0.7 per cent for the month ending September 5.
The Australian Bureau of Statistics said over this period jobs fell by 2.1 per cent in locked-down Victoria and by 0.2 per cent over the rest of the economy.
“Payroll jobs remain around 4.5 per cent lower than mid-March – 8.3 per cent lower in Victoria and 3.1 per cent lower in the rest of Australia,” head of labour statistics Bjorn Jarvis said.
The report is an additional series set up to give a more frequent gauge on the state of the economy during the pandemic.
Meanwhile, consumer confidence has risen for a third straight week, with Victorians notably more upbeat that the coronavirus outbreak in the state is being brought under control.
The ANZ-Morgan consumer confidence index – a pointer to future retail spending – rose 1.2 per cent and to its highest level in three months.
ANZ head of Australian economic David Plank said there was a notable improvement in confidence in Melbourne and the rest of Victoria.
“The success in getting the COVID-19 new case numbers down is clearly having a big impact on confidence in Victoria,” he said on Tuesday.
Melbourne consumers are now a touch more confident than those in Sydney.