By Swati Pandey
SYDNEY (Reuters) – Australia’s economy was experiencing its biggest economic contraction since the 1930s although the downturn could be shallower than earlier expected, minutes of the central bank’s latest meeting showed on Tuesday.
The minutes showed the overall outlook was still uncertain with the pandemic expected to have “long-lasting effects” on the economy, one reason the Reserve Bank of Australia (RBA) was committed to maintain its “accommodative approach” for as long as required.
The RBA had, on June 2, left the cash rate at a record low 0.25% in a widely expected decision, and reiterated that fiscal and monetary support would be required for some time.
Australia, with just over 7,300 coronavirus cases, has not reported a death from the disease in more than three weeks now, enabling states and territories to start reopening their economies.
In a sign the economy was getting back on its feet, official data out on Tuesday showed Australian payrolls picked up in May after record falls seen the previous month.
Secondary data also point to an increase in consumer spending, including eating out.
But the jobless rate, which had risen to 6.2% in April, is still forecast to increase further to 7% in May and remain elevated through 2021, while inflation is seen undershooting the RBA’s 2-3% medium-term target for the next few years.
“The Board determined that it would not increase the cash rate target until progress is made towards full employment and it is confident that inflation will be sustainably within the target band,” RBA’s meeting minutes showed.
“It was likely that this fiscal and monetary support would be required for some time.”
(Reporting by Swati Pandey and Wayne Cole; Editing by Shri Navaratnam and Lincoln Feast.)