The Reserve Bank board is considering further policy measures to support the recovery that would likely be in place for some time given the economic outlook.
In the minutes of its September 1 board meeting, released on Tuesday, the central bank board members said “substantial, coordinated and unprecedented” easing of fiscal and monetary policy in Australia was helping to sustain the economy through the coronavirus pandemic.
“They considered it is likely that fiscal and monetary support would be required for some time given the outlook for the economy and the labour market,” the minutes said.
“The board … agreed to maintain highly accommodative settings as long as required and to continue to consider how further monetary measures could support the recovery.”
The meeting agreed to leave the cash rate at a record low 0.25 per cent and continued to target three-year bond purchases at that level to keep market interest rates low.
It also extended its term funding facility to support the banking system during the crisis.
The meeting took place the day before the June quarter national accounts showed the economy had contracted by seven per cent, confirming the first recession in almost 30 years.
Meanwhile, a further rise in consumer confidence has disguised the weakness in the nation’s two major cities, with Melburnians especially unhappy about a drawn-out coronavirus lockdown.
The ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – rose 1.4 per cent last week to 92.4 points, a second consecutive increase.
However, confidence was weaker in Melbourne, dropping more than five per cent from the previous week.
“This suggests the announcement of the long path out of lockdown restrictions negatively impacted sentiment,” ANZ head of Australian economics David Plank said on Tuesday.
Confidence was also down in Sydney, falling more than three per cent from the previous week.
But confidence was higher across regional Victoria, where the index rose above 100 points suggesting there are more optimists than pessimists.
The survey’s sub-index, on “time to buy a major household item”, rose above the 100-point neutral level for the first time since the end of June.
“As discussions pick up around the October (federal) budget, we will be watching for signs that talk about tax cuts and job creation measures may impact consumer confidence,” Mr Plank said.
Treasurer Josh Frydenberg will hand down the budget on October 6, after it was delayed from its traditional May release because of the pandemic.