March 10, 2020 / 10:07 PM / a month ago

Australia c.bank hopeful combined stimulus will blunt coronavirus impact

SYDNEY, March 11 (Reuters) - The full impact of the coronavirus outbreak on Australia’s economy was still uncertain but the combined effect of fiscal and monetary policy will help the country navigate through this difficult period, a top central banker said on Wednesday.

Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle held out the hope that Australia’s A$2 trillion ($1.30 trillion) economy would bounce back once the pandemic ends.

The RBA has slashed rates by 100 basis points since last June to a record low 0.5%. Financial markets are pricing in another cut to 0.25% as soon as next month.

“The government has announced its intention to support jobs, incomes, small business and investment which will provide welcome support to the economy,” Debelle said in a speech titled “The Virus And The Australian Economy”.

Debelle was expected to talk about “investment” but instead provided a summary of how the RBA was seeing developments in the economy in light of the recent global markets rout and the spread of virus in more countries.

“The combined effect of fiscal and monetary policy will help us navigate a difficult period for the Australian economy. They will also help ensure the Australian economy is well placed to bounce back quickly once the virus is contained,” Debelle added.

The virus has infected more than 116,000 people worldwide with over 4,000 deaths since it surfaced in China late last year, according to the World Health Organization.

It has spread to more than 100 nations, hitting travel and tourism, disrupting supply chain and causing a carnage in global financial markets.

“The conclusion is that the global economy will be materially weaker in the first quarter of 2020 and in the period ahead,” Debelle said.

The RBA estimated the decline in services export in the March quarter would be at least 10%, roughly evenly split between lower tourism and education exports.

As service exports account for 5% of Australia’s annual economic output, this translates into a subtraction from growth of 0.5 percentage point of gross domestic product in the March quarter, Debelle said.

The RBA is also gathering information on supply chain disruptions through their business liaison program.

“Clearly we are still only in the early weeks of March, so the picture can change from here,” he said.

“It is just too uncertain to assess the impact of the virus beyond the March quarter.” ($1 = 1.5387 Australian dollars) (Reporting by Swati Pandey; Editing by Lisa Shumaker)

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