Australia Monetary Policy at Full Throttle, RBA Governor Says

SYDNEY--Reserve Bank of Australia Gov. Philip Lowe said Friday that monetary policy is at, or close to being at full throttle, adding that government spending and structural reforms are needed now to fight off the economic downturn brought on by the Covid-19 pandemic.

Speaking before a parliamentary committee on economics, Mr. Lowe said monetary policy is playing a supporting role, but looking forward, "there are limits to what more we can do."

"We could make some changes to the package we announced in March. I don't think at the moment we would get any traction from making adjustments," he said.

"The main thing going forward is going to be fiscal and structural policy. That's the reality we face," Mr. Lowe said.

Australia Monetary Policy at Full Throttle, Reserve Bank of Australia Gov. Philip Lowe

The comments come as Australia's economic outlook has darkened in the last few weeks, with Victoria moving back into more stringent lockdowns as the number of virus-related deaths has risen.
Consumer confidence has collapsed as a result, casting a shadow over recovery in economic growth in the second half of the year.

Some economists have speculated that the RBA might be close to announcing more measures to support demand and the banking system, despite the fact that the official cash rate is already close to zero.

The RBA has returned to buying government bonds in recent weeks after remaining sidelined for a sustained period. This was construed by some in financial markets as evidence the RBA was readying to do more.

Mr. Lowe has consistently downplayed the likelihood the RBA will adopt negative interest rates, arguing such a move would likely create more problems for the economy than it would solve.

With interest rate at record lows and expected to remain there for some time, expanding government spending to support the economy is entirely manageable and is affordable, Mr. Lowe said.

"It is the right thing to do to borrow today to help people, keep them in jobs and boost public investment at a time when private investment is very weak," he told the committee.