Australia’s central bank is expected to cut interest rates in tandem with a federal government plan to help workers keep their jobs and ease the burden on business struggling against the economic impact of the coronavirus.
The Reserve Bank of Australia will make a rare out-of-cycle announcement on monetary policy at 2.30pm on Thursday.
Usually, such announcements are delivered on the first Tuesday of each month so if it does move it will be the second time in a month the RBA has cut rates.
The cash rate could be lowered to 0.25 per cent, matching a similar reduction to 0.50 per cent on March 4. The central bank could also flag other measures to support the economy.
The spread of the coronavirus in Australia and across the world has cemented the likelihood the national economy will fall into recession this year, as consumer spending and productivity slumps.
ANZ economists have warned the economy could contract by as much as two per cent in the June quarter, risking a rise in the jobless rate to almost eight per cent from around five per cent now.
“Workers in industries such as tourism, education and retail are already being laid off and this will only worsen under travel bans, cancellations of large events and social distancing,” ANZ said in a research note to clients.
Finance Minister Mathias Cormann says the upcoming government economic package, which will follow $17.6 billion worth of support announced last week, will be “significant”.
“The extent of the economic impact has been accelerating significantly,” he told Sky News on Wednesday night.
The government is aiming for business-focused measures that cushion the impact of the crisis and may include cash payments or loan support for small and medium-sized businesses.
The government’s first stimulus package included $750 one-off payments for pensioners and welfare recipients, as well as grants of up to $25,000 for small business.
The Australian Chamber of Commerce and Industry has recommended a range of measures for the second package, including help for businesses to keep employees as well as concessional loans to assist with cash flow restraints.
Australia’s small business and family enterprise ombudsman Kate Carnell has urged the government to include sole traders in its support package, as they can’t access the grants on offer.
Senior Labor figure Penny Wong said the second package needed to be comprehensive and include help for casual workers.
“(They) face a dreadful decision if they are asked to isolate, of either doing the right thing by the community and public health, but not being able to put food on the table for their families,” she told ABC News.
“We should not put them in that position.”