Australia’s central bankers meet for the final time in 2019

The Reserve Bank of Australia (RBA) Board will meet today in Sydney to review interest rates. After cutting rate by 25 basis points from 1.5% in June, July and October, financial markets predict the RBA to make another cut to 0.5% either today or in February.

The bank has utilised monetary policy to boost employment, job growth and household consumer spending. Low yearly wage growth of 2.3% has dampened household demand. By cutting rates, the RBA aims to provide relief on mortgage payments and offer cheaper credit to potential house buyers.

The body has advocated fiscal stimulus, such as tax cuts, to encourage consumption. This is in line with the government’s focus; Treasurer Josh Frydenberg stated on October 1 that the government “was focused on creating more jobs” and ensuring economic growth, but he did not signal any concrete decision.

If it does cut rates to 0.5%, the RBA will consider using further quantitative easing tools, like printing money, to buy government bonds to aid credit flow in the economy. A cut in February is more likely than one today. That would offer more room to manipulate rates next year if foreign demand remains unfavourable and help to encourage domestic consumption once holiday retail spending is over.

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