“Although uncertainty had increased, the central scenario was still that the Australian economy would grow strongly again next year.”
Earlier this month, RBA governor Philip Lowe was challenged by Labor frontbencher Andrew Leigh about the bank’s plans to wind back its bond buying program as coronavirus case numbers were starting to climb.
“Reducing the bond purchasing program is effectively tightening monetary policy,” Dr Leigh said on Tuesday. “I’m bewildered that the RBA thinks this is the right time to tighten monetary policy.”
Westpac chief economist Bill Evans said the minutes suggested that the bank, which has stated it is responding to actual levels of wages growth and inflation rather than forecasts, is responding to forecasts around the impact of lockdowns on economic activity.
Westpac now believes the September quarter national accounts will show the economy contracting by 2.6 per cent and grow by the same amount through the final three months of the year.
Mr Evans said the country now faced the “bizarre development” of the bank at its meeting next month ignoring the short-term economic impacts of the lockdown by winding back its quantitative easing program.
“An even deeper near term hole, which now seems certain, would only prompt a change in policy if doubt was cast on the pace of recovery,” he said.
The impact of the lockdowns is growing, with the Commonwealth Bank reporting a nationwide 5 percentage point drop in spending growth over the past week based on its network of credit and debit cards.
NSW dropped by 3 percentage points (after falling over recent weeks) while Victorian spending tumbled by 20 percentage points as the state went into lockdown. There are also signs of a slowdown in Tasmania and South Australia while Queensland rebounded by 8 percentage points as restrictions there were eased.
Online spending and purchases of food through supermarkets continue to be strong but expenditure on all types of services, from personal grooming to eating out, have fallen.