The Reserve Bank in Australia has cut interest rates to a record low of 0.1 percent and announced a slew of other measures to help the country recover from the coronavirus-driven recession.
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The cut to 0.1 percent is down from the previous record low of 0.25 percent, which was announced earlier this year, and is not expected to increase for at least three years.
Alongside the drop in the official cash rate, the RBA lowered its three-year bond rate target to 0.1 percent.
The new record-low rate will also apply to the bank's term funding facility.
The central bank confirmed it would buy $100 billion worth of Australian government bonds to lift inflation and encourage lending and investment - a measure known as quantitative easing.
Other elements of today's package include:
- A reduction in the target for the yield on the three-year Australian Government bond to about 0.1 percent
- A reduction in the interest rate on exchange settlement balances to zero
Reserve Bank Governor Dr Philip Lowe said the measures would help address the high rate of unemployment, which he described as an "important national priority".
The combination of the RBA's bond purchases and lower interest rates is expected to help the country recover economically by lowering financing costs for borrowers, contributing to a lower exchange rate and supporting asset prices and balance sheets.
Lowe said the bank was "committed to doing what it can to support the creation of jobs".
"Encouragingly, the recent economic data have been a bit better than expected and the near-term outlook is better than it was three months ago," he said.
"Even so, the recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus."
Lowe said the RBA would purchase bonds "in whatever quantity is required to achieve the three-year yield target".
Unemployment expected to peak at 8 percent
Lowe said Australia could expect positive GDP growth in the September quarter despite the restrictions in Victoria.
"In the central scenario, GDP growth is expected to be around 6 percent over the year to June 2021 and 4 percent in 2022," he said.
Lowe said the country's unemployment rate was likely to remain high, but would peak slightly below 8 percent, rather than the 10 percent previously expected.
He said it was forecast to drop to 6 percent at the end of 2022.
The period of high unemployment would result in low wage growth and prices over coming years, Lowe said.
Inflation is forecast to be 1 percent in 2021 and 1.5 percent in 2022.
Lowe warned the cash rate would not increase "until actual inflation is sustainably within the 2 to 3 percent target range", which will require wages growth and "significant gains in employment".
- ABC