MNI INTERVIEW1: Payrolls Take "Turn For Worse"-RBA's Harper

Australia's payroll data looks to have taken a "turn for the worse" in July, with a fresh wave of Covid-19 virus infections in Melbourne posing a "significant danger" to Australia's economy, Reserve Bank of Australia board member Ian Harper told MNI Thursday.

The latest wave threatens to derail a recovery which, according to RBA Governor Philip Lowe, saw the labour market "turn the corner" in June with employment increasing by 210,000, to pull back a quarter of the previous two months' losses.

Speaking in a private capacity and not as an RBA Board member, Harper agreed that while the payroll data continues to indicate a recovery from the lows of April and May, it "appears to have taken a turn for the worse" in July.

SECOND WAVE

Even if a recent second wave of virus infections is contained to the state of Victoria, "it will slow the national recovery given the relative size of the Victorian economy," said Harper, who is also dean of the Melbourne Business School and co-dean of the University of Melbourne's Faculty of Business and Economics.

"This is a significant danger the more widely it spreads," he told MNI in an interview, in which he also referred to the problem posed by the appreciating Australian dollar.

"Most 'downside' scenarios, including the RBA's published in the May Statement on Monetary Policy, show a second wave will significantly deepen the downturn and slow the recovery," he said.

The Victorian situation threatens to undermine the confidence which is key to the recovery as a driver of consumption and investment, he said, although he added that the latest closely-watched NAB sentiment survey data had been "very encouraging."