CANBERRA, AAP – Reserve Bank governor Philip Lowe expects the economy will rebound by the end of the year after the impact of having half the population in lockdown battling the coronavirus is felt in the September quarter.
Following last week’s monthly RBA board meeting, the governor warned lockdowns associated with the Delta variant will see the unemployment rate rise over coming months.
But he said the setback to Australia’s economic expansion is expected to be only temporary.
“The Delta outbreak is expected to delay, but not derail, the recovery. As vaccination rates increase further and restrictions are eased, the economy should bounce back,” Dr Lowe said.
The governor will get the opportunity to expand on his views when he delivers an online speech – Delta, the Economy and Monetary Policy – to the ANIKA Foundation on Tuesday.
Economists will also be interested in the thinking behind the board going ahead with a decision to wind back on its bond buying program – which aims to keep market interest rates and borrowing costs low – at a time when the economy was heading for a hefty contraction.
The RBA is now buying $4 billion bonds a week rather than $5 billion, although it will review the program in February, instead of November as earlier flagged.
Confidence surveys due over the next couple of days will capture the mood of consumers and businesses faced with now lengthy lockdowns.
The weekly ANZ-Roy Morgan consumer confidence index, a guide to future household spending, is due on Tuesday.
The index fell 1.8 per cent last week in the face of elevated coronavirus infections in NSW and Victoria and despite rising vaccination rates.
The National Australia Bank will also release its monthly business survey for August.
Both business confidence and conditions fell sharply in July, as the full impact of lockdowns was felt.
The monthly Westpac-Melbourne Institute consumer sentiment survey is due on Wednesday.