The Australian economy braces for a deep contraction in the third quarter and heightened uncertainty for the fourth quarter due to lengthening lockdowns across major cities, the Reserve Bank of Australia (RBA) board member Ian Harper told the Wall Street Journal (WSJ) on Wednesday.
Key quotes
“Still, surging vaccination rates offer hope of a rebound in growth that could be more powerful than anything yet seen during the pandemic.”
“The RBA determined this week not to change course on its plans to reduce its government bond-buying in September, as it would have amounted to “fine-tuning” of monetary policy and run the risk of unleashing more stimulus just as the economy is emerging from lockdowns.”
“We’ve probably already booked a negative September quarter. It could be as much as minus 1% for GDP. It’s going to be quite deep and sharp.”
“The experience coming out of last year was that bounce backs are much stronger than expected.”
“We’ve gotten used to dealing with these situations, so you might expect the next snapback to be even stronger.”
“So, when the restrictions are off, there’s a whole lot of pent-up pressure that’s going to push us straight back up. My guess is we won’t see a negative December quarter. We will see a snapback.”
AUD/USD reaction
In reaction to the downbeat remarks from RBA’s Harper, AUD/USD eases from three-week highs of 0.7425, now trading at 0.7415, still adding 0.29% on the day.