SYDNEY (Reuters) – Australia’s economy will need “considerable” support for some time, Reserve Bank of Australia Deputy Governor Guy Debelle said on Tuesday, adding it would be a “problem” if the government ended fiscal stimulus in September as initially flagged.
Australia’s fiscal response to the coronavirus pandemic is among the biggest in the world at almost 10% of gross domestic product. It comes as the central bank slashed interest rates to a record low 0.25% and launched an unlimited quantitative easing programme to help buffer the economy against the fallout of the global outbreak.
The emergency measures have so far been successful in supporting the A$2 trillion ($1.38 trillion) economy, though further support will be required, Debelle noted.
“If everything ceases at the end of September then yes that would be a problem,” Debelle said, responding to a question following a speech.
“The government’s made it very clear in recent days that they are well aware of that and they are considering what they’re going to do to address that. We’ll find out more in a few weeks’ time.”
Treasurer Josh Frydenberg is due to provide an update on July 23 on whether there will be changes to the fiscal package, in particular an extension of support beyond the current end-September due date.
With the economy in recession for the first time in 30 years, the government would have reason to keep stimulus going.
Official data out on Tuesday showed payroll jobs were still 6.4% below mid-March levels when Australia had recorded its 100th confirmed case of COVID-19.
The recovery in payroll jobs between mid-April and mid-June represents only around 30% of the jobs initially lost to COVID-19, the Australian Bureau of Statistics (ABS) said.
Another worry is that an uptick in cases in Victoria could hurt Australia’s second biggest economy, with the latest data showing a drop in electronic card spending in the state.
“The pace of recovery has clearly slowed … and further highlights the importance of supplementary wage support via the JobKeeper and JobSeeker programmes,” said Sydney-based RBC economist Robert Thompson.
“The future of wage supplement programmes will be key.”
($1 = 1.4533 Australian dollars)
(Reporting by Swati Pandey and Wayne Cole; Editing by Ana Nicolaci da Costa)