$105b bridge across the chasm

Original article by Matthew Cranston, James Eyers, James Frost, Jonathan Shapiro
The Australian Financial Review – Page: 1 & 4 : 20-Mar-20

Reserve Bank of Australia governor Philip Lowe has warned that the cash rate is likely to remain at the new record low of 0.25 per cent for three years. The emergency interest rate cut on 19 March is the RBA’s first out-of-cycle move since 1997; it has coincided with the announcement of a government bond-buying program which aims to ensure that the benchmark three-year bond yield remains at around 0.25 per cent. Lowe says there will be no limit to the bond-buying program. The RBA has also announced a $90bn line of credit for banks to provide low-interest loans to small and medium enterprises; the federal government will provide an additional $15bn to small lenders to help with their funding.

CORPORATES
RESERVE BANK OF AUSTRALIA

Economic dose of medicine

Original article by Patrick Commins
The Australian Financial Review – Page: 1 & 4 : 17-Mar-20

The Reserve Bank of Australia is set to make an emergency interest rate cut in response to the coronavirus pandemic. RBA governor Philip Lowe has also flagged a government bond purchasing program to ensure that financial markets continue to function smoothly. The central bank injected some $5.9bn into the banking system on 16 March in order to boost liquidity. The US Federal Reserve and the Reserve Bank of New Zealand announced out-of-cycle interest rate cuts on 16 March; US rates have been reduced to near zero and NZ rates have been slashed by 75 basis points to just 0.25 per cent.

CORPORATES
RESERVE BANK OF AUSTRALIA, UNITED STATES. FEDERAL RESERVE BOARD, RESERVE BANK OF NEW ZEALAND

RBA may need $30b in bonds for a shot at QE, says Deutsche Bank

Original article by Matthew Cranston
The Australian Financial Review – Page: 4 : 10-Mar-20

Deutsche Bank economist Phil O’Donaghoe does not expect quantitative easing to be necessary in response to the coronavirus. He says another official interest rate cut in April and the federal government’s stimulus package should result in a 2019-20 Budget deficit of about 1.2 per cent of GDP. However, O’Donaghoe warns that if the Reserve Bank of Australia does resort to quantitative easing, it would need to purchase up to $30bn worth of bonds to generate the same macroeconomic stimulus as a rate cut of 25 basis points.

CORPORATES
RESERVE BANK OF AUSTRALIA, DEUTSCHE BANK AG

Lower rates won’t help: AFIC boss

Original article by Cliona O’Dowd
The Australian – Page: 17 & 28 : 3-Mar-20

The Australian Financial Investment Company’s MD Mark Freeman argues that official interest rates are already at a historically low level, so further monetary policy easing is unlikely to stimulate the economy or stabilise financial markets. The Reserve Bank is widely tipped to reduce the cash rate on 3 March, and there is growing speculation that it could pursue quantitative easing later in the year. However, Freeman has questioned the merits of quantitative easing. He adds that the sharemarket’s recent pullback has created some good buying opportunities.

CORPORATES
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED – ASX AFI, RESERVE BANK OF AUSTRALIA

$A catches coronavirus, plummets to 11-year low

Original article by Tom Richardson
The Australian Financial Review – Page: 27 : 3-Mar-20

The Australian dollar reached a low of $US0.654 in local trading on 2 March, ahead of the Reserve Bank of Australia’s monthly board meeting. Financial markets have priced in a near-97 per cent chance that the central bank will reduce the cash rate on 3 March, and a 67 per cent chance of a second rate cut in May. Morgan Stanley expects the cash rate to remain on hold until April, giving the RBA time to assess GDP data to be released on 4 March. The Commonwealth Bank says the economic impact of the coronavirus could prompt the Australian dollar to fall further in coming days.

CORPORATES
RESERVE BANK OF AUSTRALIA, MORGAN STANLEY AUSTRALIA LIMITED, COMMONWEALTH BANK OF AUSTRALIA – ASX CBA

Rate cut tipped amid virus crisis

Original article by Richard Gluyas
The Australian – Page: 17 & 20 : 2-Mar-20

Financial markets have now priced in an 87 per cent chance that the Reserve Bank of Australia will reduce the cash rate on 3 March. This compares with an 18 per cent chance on 28 February. The case for further easing of monetary has been strengthened by the local sharemarket’s 9.8 per fall in the last week of February, amid global bearish sentiment as the coronavirus outbreak continued to spread beyond China. Shane Oliver of AMP Capital says the RBA would probably have preferred to wait a bit longer to act. Federal Reserve chairman Jerome Powell has also flagged the possibility of interest rate cuts to stimulate the US economy.

CORPORATES
RESERVE BANK OF AUSTRALIA, AMP CAPITAL INVESTORS LIMITED, UNITED STATES. FEDERAL RESERVE BOARD

Reserve Bank wary of risks from low rates

Original article by Patrick Commins
The Australian – Page: 25 : 19-Feb-20

The minutes of the Reserve Bank of Australia’s board meeting for February show that the central bank considered the potential downside risks of further easing monetary policy when it left interest rates on hold. The board also noted that the coronavirus outbreak presents a risk to the economic outlook for both China and Australia in the near-term. Most economists expect an official interest rate cut in April or May, and the futures market has fully priced in a rate cut by October.

CORPORATES
RESERVE BANK OF AUSTRALIA

Rates to stay low ‘for decades’: RBA

Original article by Cliona O’Dowd
The Australian – Page: 19 & 29 : 14-Feb-20

Reserve Bank governor Philip Lowe has conceded that the coronavirus outbreak is likely to have a near-term impact on the economy, although he does not expect the outlook for 2020 to be significantly affected. He adds that the Australian economy will benefit from stimulus measures in China when the virus is brought under control. Lowe has also warned that climate change has ‘profound’ economic implications for Australia, while he says official interest rates may remain low for a long time.

CORPORATES
RESERVE BANK OF AUSTRALIA

RBA optimism boosts dollar

Original article by David Rogers
The Australian – Page: 17 & 27 : 6-Feb-20

The odds of an official interest rate cut in the near-term have lengthened, with financial market pricing now implying that rates will be on hold until September. Meanwhile, the Australian dollar rebounded from its recent four-month low in response to a speech by Reserve Bank governor Philip Lowe on 5 February. He said the bushfires will have little impact on Australia’s overall economic growth in 2020, due to expenditure on recovery programs. However, he conceded that GDP growth will fall in the short-term. Lowe added that it is too soon to determine the likely economic impact of the coronavirus.

CORPORATES
RESERVE BANK OF AUSTRALIA

RBA keeps faith in the economy

Original article by David Rogers
The Australian – Page: 17 & 24 : 5-Feb-20

Financial markets still expect the Reserve Bank of Australia to reduce the cash rate by June, after it left rates unchanged at 0.75 per cent on 4 February. The general consensus of economists is that the cash rate will remain on hold in March. Meanwhile, economists had expected the RBA to downgrade its economic growth forecasts for 2020 and 2021 in the wake of the bushfires and the coronavirus crisis, but these have been left at 2.75 per cent and 3 per cent respectively. The central bank also expects the unemployment rate to remain at around 5.1 per cent in 2020, before easing to less than five per cent in 2021.

CORPORATES
RESERVE BANK OF AUSTRALIA