MNI POLICY: RBA On Hold, Corporate Risks Building: Minutes

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of Australia left monetary policy unchanged

at the April 7 meeting, but saw risks building in the commercial property and

corporate sectors, the minutes published Tuesday show.

     The RBA reaffirmed the program of measures announced in March, which saw a

cut in rates to 0.25%, the introduction of the term funding scheme and the start

of a program to buy Government bonds to target a yield of 0.25% on the benchmark

3-year bond.

     These measures would stay in place until the economy showed an improvement

towards the RBA's employment and inflation targets, the minutes underlined.

     After spending more than AUD30 billion in buying bonds over a two week

period, "it was likely that smaller and less frequent purchases" would be

required, with future operations adjusted according to market conditions, the

minutes said.

     --COMMERCIAL SECTOR

     The RBA identified the commercial property market and the corporate sector

as key risks to the financial system, but expressed confidence in household

financial resilience and the stability of Australian banks.

     Conditions in commercial property were "deteriorating" even in advance of

the COVID-19 disruption, with several years of commercial property price growth

in excess of growth in rents.

     "Following the outbreak, some retail tenants had been seeking suspensions

in rent payments or large rent reductions," the minutes said, with the RBA

saying the situation needed "close monitoring."

     On the corporate sector, the RBA noted that although most companies had low

gearing and sufficient liquidity to weather a "moderate shock", the current

contraction would be a "very large shock" to many businesses in industries

exposed to the disruption.

     The minutes welcomed moves by the Government to subsidise wages and pointed

to the RBA's AUD90 billion term funding facility (TFF) as key supports for

businesses during the pandemic.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]