SYDNEY (Reuters) – Australia’s financial regulators scheduled an emergency call on Monday to discuss the impact of the coronavirus outbreak, two sources familiar with the matter told Reuters, as the country seeks to avoid a risk of recession.
FILE PHOTO: People with facial masks walk through Flinders Street station after coronavirus cases were confirmed in Melbourne, Victoria, Australia, on January 29, 2020. REUTERS / Andrew Kelly
The conference call, which involves the country’s prudent regulator, the market regulator and the central bank, occurs when the markets now expect the Reserve Bank of Australia (RBA) to reduce its cash rate as soon as Tuesday in its scheduled monthly review. [AU/INT]
The epidemic in China, Australia’s No. 1 trading partner, is having a huge impact on Down Under with a travel ban that affects the tourism and education sectors and has indirect effects on overall spending.
There are now 30 confirmed cases in Australia and the country’s medical director warned on Monday that it was no longer possible to completely prevent people with the coronavirus from entering the country.
If the RBA facilitates the policy, as expected, it will become the first central bank in the developed world to respond to the coronavirus, with the US Federal Reserve. UU. And the Bank of Japan also ready to act.
“In times of apparent crisis, the RBA will want to feel ahead, not behind the curve,” Betashares chief economist David Bassanese said in a note.
“In fact, Australia now faces its greatest risk of recession since the global financial crisis, with already weak private demand and with much less fiscal and monetary power to respond.”
The timing of Monday’s meeting is unknown and it is not clear whether regulators will issue a joint statement.
Australian financial futures They now have an almost total price in a quarter-point cut at the 0.5% cash rate from a historical low of 0.75%. Last week, futures implied a one-in-five probability of such a move.
Australian treasurer Josh Frydenberg reiterated on Monday that his government’s fiscal response to the coronavirus will be “responsible, considerate and directed.”
Frydenberg said he expects the economy of A $ 2 billion ($ 1.3 billion) to further extend its 29 years of growth without recession, despite a series of below-average economic data since mid-2018.
Economists believe that a stronger fiscal response is needed to support economic growth.
“Lower interest rates can help cash flows, lower the exchange rate and potentially increase confidence, but an easier fiscal policy will also be required, particularly when both the household sector and business investment are already weak, “said NAB chief economist Alan Oster.
Wednesday’s data is expected to show that the economy expanded at a rate below 2% in the last quarter, although growth in the current quarter could turn negative.
Oster is one of several economists, including those from Westpac, UBS and Goldman Sachs, who changed their forecasts on Monday to predict a 25 basis point cut at Tuesday’s meeting. The decision will be announced at 0330 GMT. [AU/INT]
Representatives of the RBA and the Australian Prudential Regulation Authority declined to comment. The Australian Securities and Investment Commission did not immediately respond to requests for comment.
Swati Pandey Report; Editing by Edwina Gibbs and Richard Pullin