There is growing speculation the Reserve Bank board will endorse a suite of measures to further boost the economic recovery from recession, including trimming the cash rate.
Some economists expect this could happen as early as its October 6 meeting, just hours before Treasurer Josh Frydenberg delivers his delayed 2020/21 federal budget, in what is being described as a “Team Australia” moment.
A reduction in the cash rate to 0.10 per cent from an already record low 0.25 per cent has been doing the rounds for some time.
But Reserve Bank deputy governor Guy Debelle added fuel to the fire when in a speech on Tuesday when he a presented a number of options the central bank has at its disposal.
This included lowering the rate structure for the target of the three-year bond yield and the term funding facility rate, both of which now sit at 0.25 per cent.
He also signalled the central bond could extend its bond buying program beyond three-years and to longer maturities.
National Australia Bank economists now see a “significant risk” of a cut to 0.10 per cent in the cash rate.
Westpac chief economist Bill Evans expects such a reduction will happen at the October 6 board meeting.
“The prospect of the RBA ‘sitting back’ to assess the budget, which has been seen as the ‘norm’ in previous years is not appropriate for these unique times,” Mr Evans said.
TD Securities senior rate strategist Prashant Newnaha also expects the Reserve Bank to “pull the trigger” in October.
He said the central bank governor Philip Lowe has previously expressed low confidence on hitting its unemployment and inflation targets.
“The deputy governor cemented this yesterday. We now expect the RBA to act at next month’s meeting,” he said.
But former Labor prime minister Paul Keating, who set-up the initial framework for the independent central bank, is unimpressed by its tardiness.
“As history has shown, when a real crisis is upon us the RBA is invariably late to the party. And so it is again,” Mr Keating said a statement.
“In an economic emergency of the current dimension that means putting the orthodoxy into perspective and doing what is sensibly required.”
Interest rate futures imply a cash rate of just 0.075 per cent for October.
Such talk came as new data showed retail spending fell across the nation in August, with Victoria recording a massive 12.6 per cent drop as the state’s COVID-19 restrictions hit non-essential retail businesses.
Australian Bureau of Statistics preliminary retail trade figures for the month showed national turnover fell by 4.2 per cent compared to July.
Outside of Victoria, retail activity fell 1.5 per cent.
“Household goods retailing led the falls, although sales in this industry remain 20 per cent above the levels of August 2019,” the bureau said on Wednesday.
Over the year, retail turnover was still 6.9 per cent higher, although it was up 12 per cent in the 12 months to July.
Separate figures saw demand for workers nationally growing for a fourth month in a row but job advertising declined again in Victoria.
Department of Education, Skills and Employment data showed jobs ads posted on the internet in August rose 1.3 per cent but were still down 19.5 per cent compared with a year earlier.
All jurisdictions, except Victoria, recorded gains in recruitment activity during the month.
In Victoria, job ads fell by 7.5 per cent – its second monthly decline.
In contrast, job ads rose by 7.4 per cent in South Australia, 8.1 per cent in Tasmania, 8.3 per cent in the ACT and 8.7 per cent in Western Australia.