MNI PREVIEW: RBA Set To Hold, Sept Eyed As Key For Economy

--RBA Policies In Recent Months Seen Hitting Goals, Complementing Govt Action

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of Australia will likely leave monetary

policy on hold when it meets on June 2, with benchmark rates remaining at 0.25%

for a third consecutive month and the scale of the bond buying program left

unchanged, keeping the 0.25% yield target on benchmark 3-year government bonds.

     In recent weeks, the RBA has been consistent in its messaging that it

believes policies enacted in the immediate aftermath of the coronavirus outbreak

are being transmitted as designed, complementing the Federal Government's AUD259

billion fiscal stimulus package, with a slow recovery from the sharp slowdown

expected in H2

     The RBA cut rates by 50 bps at an out of cycle meeting in March, when it

simultaneously announced the bond buying, along with a term finance package.

     --SEPTEMBER FOCUS

     Appearing before a Senate finance sub-committee on May 28, RBA Governor

Philip Lowe nominated this coming September as a "critical point" for the

economy as this is when the key Government employment support program, called

JobKeeper, was scheduled to end along with mortgage 'holidays' from commercial

banks.

     "It's clearly going to be a critical point when that scheme comes to an end

and also when the deferral for six months of mortgage payments and other

payments that the banks are offering, so that's a critical point for the

economy," Lowe said.

     Lowe noted that the Government had said it would review JobKeeper after

three months, adding that it was "very important" that the stimulus measures not

be cut off too quickly, suggesting that the program might be modified or

targeted at specific industries.

     --LESS BAD

     He said the employment market was the key to the economic recovery, and

that the economy appeared to be recovering better than expected.

     As a result the RBA had revised its estimate for working hours lost in May

down from a 20% decline to 15%. Hours worked fell by 9% in April.

     The RBA has previously forecast that unemployment would reach 10% in the

second quarter, while GDP growth would fall by 10% over the first half of the

year.

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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

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