MNI REVIEW: RBA Leaves Rates On Hold, Downturn 'Less Severe'

     SYDNEY (MNI) - The Reserve Bank of Australia left official interest rates

unchanged at a record low 0.25% Tuesday, saying the domestic economic downturn

is "less severe than earlier expected."

     The Bank also re-affirmed its bond buying program, which has seen it spend

AUD50 to control yields on 3-year Government debt, and also recommit to its Term

Funding Facility which has seen commercial banks draw around AUD$15 billion so

far from the AUD90 billion available.

     The RBA was not expected to move on rates or other policy measures this

month, and is likely to maintain its current settings in anticipation of what

might happen to the economy after September, when current fiscal stimulus from

the Australian Government is scheduled to end.

     --STABILISATION

     In its statement accompanying the policy decision, the RBA noted that

Australia's economy was going through the biggest contraction since the 1930s,

but said that conditions had stabilised.

     In particular, recent declines in hours worked were "considerably smaller"

than in April and "less than previously thought likely."

     "There has also been a pick up in retail spending in response to the

decline in infections and the easing of restrictions in most of the country,"

the RBA said.

     Nevertheless, the outlook was "highly uncertain" and this was making many

households and businesses cautious and to that end, the Bank said accommodative

policies will be maintained for as long as required.

     The Board met in Sydney as second city Melbourne went into a wider lockdown

with a new spike in coronavirus infections.

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

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