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NATIONAL ACCOUNTS DECEMBER 2022: with almost 9 years of the Abbott-Turnbull-Morrison Government mismanagement to reverse there is good news and not so news in the numbers

 

 Australian Bureau of Statistics, 12 things to know about the Australian economy right now, 7 December 2022:

Source

Australian National Accounts: 

National Income, Expenditure and Product, September 2022

The Australian Economy - September quarter 2022

1. Our economy grew 0.6 per cent during the September quarter 2022, and 5.9 per cent compared to last year. This was the fourth consecutive quarter of growth since the COVID-19 Delta variant lockdowns. Household consumption drove the increase, growing 1.1 per cent.
2. We spent more and saved less. The household saving rate continued to fall reaching pre-pandemic levels. Households saved 6.9 per cent of their income during the quarter, compared to 6.8 per cent in the December quarter 2019.
3. Consumer prices rose 1.8 per cent during the September quarter 2022 and 7.3 per cent compared to last year. This was the fastest annual increase since 1990. The major drivers of consumer price increases during the quarter were in housing, gas and furniture.
4. Wage growth continued to trail inflation but showed signs of strengthening in response to tight labour market conditions. The unemployment rate for the month of September was 3.5 per cent. Compensation of employees rose 3.2 per cent, which was the highest quarterly rise since December quarter 2006. The private sector wage price index rose 1.2 per cent in the September quarter 2022, the highest rate of growth since September quarter 2010. Compared to a year ago, private sector wages rose 3.4 per cent, the highest annual rate of growth since December quarter 2012.
5. We continued re-engaging with the world. In the first full quarter of relaxed international travel restrictions, spending on overseas trips grew 58 per cent. International travel reached 56 per cent of pre-pandemic levels as holidays returned to our lives.
6. Airlines soared. With pent-up demand, activity in the air transport industry rose 25.2 per cent. The construction industry was strong on the back of major engineering and infrastructure projects, and rose 2.3 per cent. Coal mining activity has fallen for four quarters in a row.
7. Domestic mobility increased. Household purchases of transport services rose 13.9 per cent, reaching 70 per cent of pre-pandemic levels. We purchased more cars as supply bottlenecks began to ease and imports rose. Catering and accommodation services also grew by a strong 5.5 per cent with increased tourism and mobility.
8. Our exports rode on the sheep’s back. While wet weather hampered exports of coal, rural exports surged 9.8 per cent, led by wool and cotton. Imports of communications equipment rose 5.7 per cent as new mobile phone models became available.
9. Exports were supercharged by lithium. Our lithium concentrates exports reached a value of $3.4 billion this quarter and was up six-fold through the year. Lithium has surged into Australia’s top 10 export commodities.
10. Private business investment rose 2.5 per cent led by an increase in infrastructure building. Home-building activity rose 3.4 per cent following an uptick in building approvals, a moderation of labour and material shortages, and an improvement in weather conditions. Government construction fell as quarantine facilities in Queensland and Western Australia were completed.
11. Profits of financial corporations rose 4.9 per cent during the quarter. Rises in the cash rate during the quarter saw lenders tending to pass on rate increases on loans more quickly than on deposits. This was the fastest growth in financial profits since September quarter 2008.
12. The current account returned to deficit for the first time since March quarter 2019 as corporate profits went overseas. Mining profits fell 7.1 per cent during the quarter due to weaker commodity prices.

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It should be noted that since the aforementioned data was compiled the Reserve Bank of Australia has raised the cash target rate three times - to 2.60% in October, 2.85% in November and 3.10% in December 2022.  Resulting in the September wage price index rise for the private (1.2%) and public (0.6%) sectors falling further below cost of living increases which stood at a rise of 7.3% over the 12 months to September Quarter 2022.

According to the ABS, in 2022 annual CPI inflation reached its highest level in 20 years.

The Monthly Cost Price Index (CPI) for September showed that the most significant price rises were Housing (+10.3%), Food and non-alcoholic beverages (+9.6%) and Transport (+6.8%).

While the monthly CPI indicator rose 6.9% in the twelve months to October 2022, with the most significant price rises occurring in Housing (+10.5%), Food and non-alcoholic beverages (+8.9%) and Transport (+7.4%). New dwelling prices appear to be driving the increase in housing costs.

BACKGROUND

In Australia in April 2022 cash rate target/market interest rate was 0.1% - a percentage point it had been held at by the Reserve Bank since November 2020.

In May 2022 the rate rose to 0.35%; in June to 0.85%; in July to 1.35%, in August to 1.85%; in September to 2.35%; in October to 2.60%; in November to 2.85%; and finally, in December to 3.10%.

The headline inflation rate by October 2022 was est. 6.9%.

Sometime in January-March 2023 cash rate target/market interest rate is predicted to be at 3.60% & perhaps even 3.85% by May 2023.

In 2022 the Consumer Price Index (CPI) rose 2.1 per cent in the March 2022 quarter; rose 1.8 per cent in the June 2022 quarter and rose 1.8 per cent again in the September 2022 quarter.

Australia is seeing mortgage stress and other cost-of-living pressures rise, but we can avoid the financial impact being felt in the UK and US, says a UNSW Business School real estate expert

A perspective on the national economy, inflationary pressures, interest rates, house prices, household budgets and cost of living......

UNSW, media release, 7 November 2022:

What happens to the economy if you can't pay your home loan?

Australia is seeing mortgage stress and other cost-of-living pressures rise, but we can avoid the financial impact being felt in the UK and US, says a UNSW Business School real estate expert.

For economists – and indeed, anyone else with an interest on how much they spend at the supermarket – cost-of-living and housing prices have been hot topics in 2022. The Reserve Bank of Australia (RBA) has been trying to combat rising inflation with interest rate raises (read how that works here).

The latest rise was announced by the RBA last week on November 1, with the official cash rate rising to 2.85 per cent.

This process has contributed to a fall in house prices in some areas, as well as fears from mortgage holders that they won't be able to make payments on the now larger amounts.

“Australians have been fortunate to see sustained house price growth for a while now,” says economist and expert in real estate markets, Dr Kristle Romero Cortés Associate Professor in the School of Banking & Finance, UNSW Business School. “But they need to know, house prices can come down too.”

But while data from the Domain Group (shares of which are majority owned by Nine Media) might have recently shown the sharpest quarterly decline in house prices since 1994 across the country’s biggest capital cities, Dr Romero Cortés isn’t unduly concerned about house price falls.

“Commentary on the housing market is quite sensationalised in the media.”

But when it comes to not being able to pay the mortgage, and the impact higher loan repayments might have on the economy? That’s a bit more complicated to predict.

Why Australia may not follow other countries into financial disaster

Australians only have to look over to the United Kingdom to feel nervous when witnessing the impact of high inflation and interest rates on the economy and the day-to-day lives of financial situation of its citizens.

Like Australia, the UK’s central bank (the Bank of England) has introduced a series of interest rate hikes that have had a limited effect. Unlike Australia, the UK economy is still reeling from Brexit, plus a post-pandemic recovery, high inflation and energy costs, and levels of wage stagnation that have seen various sections of the working population strike.

The country has also just experienced the effects of a disastrous set of economic policies and extensive tax cuts for the wealthy implemented by Liz Truss as prime minister, which would have put money into in an already inflated economy (where the idea is to usually ‘cool’ things by encouraging people not to spend).

This spooked the financial markets to such a degree that investors quickly sold off British assets, including government bonds. The value of the pound plunged, forced the Bank of England to take an unprecedented step and pledge 65 billion pounds worth of bonds to stop pension funds from failing and stabilise the market … and caused Liz Truss to resign after just 44 days.

For the average Briton, this situation has led to a greater threat of recession: something which could lead to loss of jobs, higher unemployment, higher inequality, wage growth that is too low to match price increases, and issues meeting costs, such as regular mortgage payments that have already risen because of interest rate hikes.

But does the UK situation foreshadow D-R-A-M-A for the Australia’s own economy and housing market? Dr Romero Cortés says no – for several reasons.

Australians are fans of variable rate loans - unlike in the UK

As well as not experiencing a Brexit-like crash or an energy price crunch to the same degree, a big point of difference is that Australians are more likely to have opted for the more flexible variable rate mortgages, than in the UK, where homeowners are more likely to have picked fixed rate mortgage.

In the UK, 74 per cent of homeowners have a fixed rate mortgage for their home loans, and 96 per cent have chosen this option since 2019, according to data from UK-based trade association, UK Finance. AMP Capital data shows that Australia has a higher share of mortgage holders with variable rate mortgages. Just 10-15 per cent picked fixed rates before 2020 (although this rose to 40 per cent in 2020-2021).

While variable rate mortgages can be a great option when interest rates are low in the short-term, fixed rate mortgages can be more predictable over the long-term, as they are less impacted by interest rate rises that can raise overall home loan repayments.

“What we see in the US or Europe is not necessarily what we will see here,” Dr Romero Cortés says. “The US Federal Reserve (Fed) or the Bank of England are also effectively trying to slow down the economy, but when they raise their rates, they can't reach a large portion of homeowners that have a 30-year fixed rate mortgage.

“The Fed and the Bank of England can raise cash rates all they want – they are not reaching these homeowners.

“In Australia, our increases from the RBA pass through the banks almost instantaneously to the consumers,” she explains. “There is a slight delay because banks want to give borrowers as much time as possible to budget in an increase, but that rate does flow through almost automatically in a way that's much faster here than you'll see in countries like the US and UK.”

This means, faster possible cooling impacts on the economy with the RBA puts interest rate hikes in place.

Another big factor is that the big four Australian banks are highly capitalised.

“They are flush with cash,” explains Dr Romero Cortés. “I study the financial network in Australia, and it is very sound. We won’t see the kind of crisis that we saw in the US in 2008, where the banks were holding assets that they didn't understand the underlying worth of.”

What does that mean for mortgage stress and the Australian economy?

Dr Romero Cortés say that while lifting of interest rates might mean Australia will see mortgage stress rise faster than in other places, it is this situation that helps the RBA prevent the economy from “running red hot” and collapsing in on itself.

“Like any central bank, the RBA wants to ensure price stability, and they will do whatever it takes to prevent us from losing this. They don’t want consumables like bread and eggs to suddenly be seven times as much the next day. If that happens people will revolt, effectively.

“We're nowhere near there. But that's why we don't want to get anywhere near there. So, the RBA stay very much on top of this, and their role is to keep this issue as front and centre of the Australian public for as long as they need, so they are more cautious with their spending over a longer period of time.”

It’s in this way that the RBA plays a psychological stabilising role, not just a financial one.

“You know, ‘Okay, the RBA is on this: so, I don't need to freak out’,” says Dr Romero Cortés. “Because if you as a member of the financial public start freaking out, you’re more likely to make poor financial decisions which have more of a domino effect on the wider economy.”

Having said that, there is a limit to how much financial stress homeowners can undergo.

"There could be a point where homeowners and others can't withstand the raising of monthly repayments any longer,” she says. “This is not yet the case.

“Long term, you would expect some sort of horizon where things settle around 4 or 5 per cent cash rate. Australia is highly leveraged (meaning it has an on average high level of debt to equity), so more than that would be difficult to sustain.”

Banks don’t want to see mortgage defaults

At the end of the day, lenders don’t want homeowners to default on loans or to proceed with a repossession. It’s costly, in time, effort and capital for them, says Dr Romero Cortés. They would much rather work with the borrower before they get to that point of extreme financial difficulties.

“A homeowner in financial stress would contact your bank, who would require some documentation of financial hardship, and then would work with you either in a payment plan or deferral plan, refinancing or making interest-only payments.”

Remember: you're not getting out of it. You still pay it, the interest is still accruing, and it could lengthen the loan term. All this means that borrowers are going to consume less in other places, and therefore is supposed to lead to a ‘cooling’ of the economy.

What happens if cost of living doesn’t come down?

But if living here gets too hard and expensive with inflation or higher mortgage repayments, you could see Australia reputation as ‘a good place to live’ take a hit, pushing down the number of people who want to live here, and putting further pressure on an already tight labour market, says Dr Romero Cortés.

For example, a portion of all the Australians with overseas heritage might decide Australia is too hard and expensive to live in and move to their other country of citizenship. That’s when it might start to get uncomfortable.

"Australia has an economy that's built up by people wanting to come to Australia, and we’re constantly growing in that fashion,” explains Dr Romero Cortés. “There's demand for housing, education, and we currently have people willing to come here.

“So, the government can say whatever they want about the RBA [and their decision to raise rates] so they will get voted in again. But the RBA doesn’t have a choice: one family defaulting on their mortgage, compared to everyone not being able to afford bread, is what they are envisioning.”

Does all this mean house prices will come down more?

Higher mortgage repayments could pressure homeowners to accept lower sale prices than they might have expected from their property, investment or otherwise; nudging down overall prices on the property market over a period of time, as well as the occasional ‘fire sale’.

“Are you going to see a massive crash of house prices where you see a Bondi four-bedder going for $500,000? No.

“But we could see a small depression in prices where 5 to 10 per cent of the price is cut. Even if you cut off 10 per cent from a $2 million home, that's $200,000 less. This means unless they have to, sellers are not going to want to sell.”

All this means it is true you're going see some very high mortgage payments and additional cost of living pressures as homeowners prioritise their mortgage repayments, Dr Romero Cortés points out.

“It’s also true that politicians (who are complaining about the RBA’s approach) may be among those who own a lot of investment properties themselves.”

Dr Kristle Romero Cortés is an Associate Professor in the School of Banking & Finance in the Business School at UNSW Sydney, an expert in real estate economics and formerly worked at the Federal Reserve Bank of Cleveland.

Tweet of the Week

WHO WOULD HAVE THOUGHT that a big part of the reason why prices have gone up so much & wages are kept down is because big business has so much power in our country they can get away with both!!! It seems the RBA is finally saying it out aloud. Price gouging & wage suppression.

— Sally McManus (@sallymcmanus) September 16, 2022

 

Australia's Reserve Bank signals that inflation is expected to increase beyond the 5.1% rise recorded for the twelve months to March Quarter 2022 - 5 weeks after initially raising its cash rate target the Bank raised the rate for a second time on 7 June 2022

 

On 3 May 2022 the Reserve Bank announced that due to a stronger than expected rise in the inflation rate, measures were being undertaken to reduce inflationary pressure. 

Put simply, monetary policy indicated a need to drive the current inflation rate from 5.1% down to somewhere between 2-3% to keep basic cost of living increases within manageable limits and the national economy stable.

In order to begin this process the Board decided to increase the cash rate target by 25 basis points to 35 basis points. It also increased the interest rate on Exchange Settlement balances from zero percent to 25 basis points.

This translated into a cash rate of 0.34% and an exchange settlement balance interest rate of 0.25%.

On 7 May the Reserve Bank moved again - raising the cash rate to 0.85% and the exchange settlement balance interest rate to 0.75%.

If inflation continues to rise in the second half of this year it is possible that the Reserve Bank will increase the cash rate target to est. 1.25% by the end of December 2022. There is some speculation in business/financial media that the cash rate target might go as high as 2.5% sometime in 2023 before it begins to fall.

Commercial banks will likely be reassessing their lending rates in the coming weeks. The four big banks - Westpac, CBA, ANZ and NAB - have already responded with variable home loans increasing by 0.5%. That increase comes into effect from 17 June (CBA, ANZ, NAB) and 21 June 2022 (Westpac). 

By way of example, this increase is likely to add around $115 per month on a $450,000 home loan where the homeowner is making a scheduled principal and interest payment. 

~~~~~~~~~~~~~~~~~~~~

Reserve Bank of Australia

Media Release

Statement by Philip Lowe, Governor: Monetary Policy Decision

Number 2022-14

Date 7 June 2022

At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 85 basis points. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 75 basis points.

Inflation in Australia has increased significantly. While inflation is lower than in most other advanced economies, it is higher than earlier expected. Global factors, including COVID-related disruptions to supply chains and the war in Ukraine, account for much of this increase in inflation. But domestic factors are playing a role too, with capacity constraints in some sectors and the tight labour market contributing to the upward pressure on prices. The floods earlier this year have also affected some prices.

Inflation is expected to increase further, but then decline back towards the 2–3 per cent range next year. Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago. As the global supply-side problems are resolved and commodity prices stabilise, even if at a high level, inflation is expected to moderate. Today's increase in interest rates will assist with the return of inflation to target over time.

The Australian economy is resilient, growing by 0.8 per cent in the March quarter and 3.3 per cent over the year. Household and business balance sheets are generally in good shape, an upswing in business investment is underway and there is a large pipeline of construction work to be completed. Macroeconomic policy settings are supportive of growth and national income is being boosted by higher commodity prices. The terms of trade are at a record high.

The labour market is also strong. Employment has grown significantly and the unemployment rate is 3.9 per cent, which is the lowest rate in almost 50 years. Job vacancies and job ads are at high levels and a further decline in unemployment and underemployment is expected. The Bank's business liaison program continues to point to a lift in wages growth from the low rates of recent years as firms compete for staff in a tight labour market.

One source of uncertainty about the economic outlook is how household spending evolves, given the increasing pressure on Australian households' budgets from higher inflation. Interest rates are also increasing. Housing prices have declined in some markets over recent months but remain more than 25 per cent higher than prior to the pandemic, supporting household wealth and spending. The household saving rate also remains higher than it was before the pandemic and many households have built up large financial buffers. While the central scenario is for strong household consumption growth this year, the Board will be paying close attention to these various influences on consumption as it assesses the appropriate setting of monetary policy.

The Board will also be paying close attention to the global outlook, which remains clouded by the war in Ukraine and its effect on the prices for energy and agricultural commodities. Real household incomes are under pressure in many economies and financial conditions are tightening, as central banks withdraw monetary policy support in response to broad-based inflation. There are also ongoing uncertainties related to COVID, especially in China.

Today's increase in interest rates by the Board is a further step in the withdrawal of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic. The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed. Given the current inflation pressures in the economy, and the still very low level of interest rates, the Board decided to move by 50 basis points today. The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time. [my yellow highlighting]

So how does the Reserve Bank see household finances across Australia in April 2022?

 

Although global financial systems have held up during the COVID-19 global pandemic, by April 2022 the Russian invasion of Ukraine and subsequent risk of financial stress caused by sanctions had become a factor in the international financial equation. Thus far any risk for Australia's economy appears to be considered manageable.

However, with interest rates expected to begin to rise again by June 2022, real wages growth still in what has been an 8 year-long stagnation with no light on the horizon, home insurance rates predicted to rise by more than 10 per cent on the back of widespread flooding on the Australian east coast, a continuing shortage of affordable housing stock with overall housing supply also expected to significantly drop and, annual residential rental growth continuing to rise sharply, the next few years may not be as manageable for some households.

Here are excepts from the Reserve Bank’s assessment of household and business finances.

Reserve Bank of Australia, Financial Stability Review April 2022, Household and Business Finances:

The incidence of household financial stress is low and declining, but a small share of households are vulnerable to cash flow shocks …

The share of APRA-regulated lenders’ non-performing housing loans was just 0.9 per cent at the end of 2021 – lower than before the pandemic (see ‘Chapter 3: The Australian Financial System’). Almost all borrowers who have exited loan payment deferral arrangements available earlier in the pandemic are now up to date with their repayments. The recent strength in employment is likely to have offset the unwinding in fiscal policy support for most indebted households. For the small number of borrowers who are currently experiencing repayment difficulties, liaison with banks indicates that the vast majority had been experiencing problems prior to the pandemic, and that early indicators of financial stress in other borrowers (such as households reducing their prepayments) remain very low.

Households in flood-affected areas of New South Wales and Queensland are facing significant challenges. To alleviate near-term financial challenges, government disaster-relief payments and hardship assistance from lenders have been made available. Recent estimates suggest that the number of insurance claims is higher than following the 2011 Queensland floods and Cyclone Yasi; although, to date, the total value of claims has been lower as fewer homes require rebuilding. Banks direct exposures to the most heavily affected households are small relative to total lending.

More broadly, the small share of borrowers with low liquidity buffers are more likely than other borrowers to have their financial resilience tested if they experience an adverse shock to their incomes or expenses, including through higher inflation. The risks for households with low liquidity buffers are likely to be even higher for those whose payment buffers have been declining (as opposed to low and stable) and for those who also have high levels of debt. The Securitisation data indicate that, for owner-occupiers with variable-rate loans, the overall share of borrowers with a loan six or more times their income and a buffer of less than one month of minimum repayments has declined since the beginning of the pandemic, to just below 1 per cent (Graph 2.4). The share of owner-occupier variable-rate borrowers with low and declining buffers has decreased to around 2 per cent over the same period. Declines in the shares of both groups of vulnerable borrowers are partly due to lower interest rates.

Historically, renters have been more likely to experience financial stress than indebted owner-occupiers. According to the Household, Income and Labour Dynamics in Australia (HILDA) survey, around one-third of renters reported at least one instance of financial stress (such as being unable to pay a bill on time or heat their home) in 2020, compared to one-sixth of owner-occupiers (Graph 2.5). Although renters are unlikely to pose direct risks to the stability of the financial system (as they have less debt), financial stress for renters could translate to repayment difficulties for indebted landlords or pose indirect risks by constraining household consumption and so economic activity. Renters with a combination of low liquidity buffers prior to the pandemic (equivalent to less than one month of disposable income) and high housing cost burdens (rental payments equivalent to more than 30 per cent of disposable income) were much more likely to report financial stress than other households. Around 15 per cent of renters were vulnerable based on this metric in 2020.

Although the value of consumer debt has declined over recent years, there has been strong growth in households using buy now, pay later (BNPL) services. BNPL services are generally a form of short-term financing that allow consumers to pay for goods and services in instalments. It is estimated that the value of BNPL transactions increased by around 40 per cent over the year to the December quarter of 2021, and the total number of BNPL accounts was equivalent to around one-third of the adult population (although some people have more than one account). There have been some increases in the incidence of late payments on these products. However, the value of BNPL transactions remains relatively small compared to other forms of personal finance, with the value of domestic personal credit and charge card purchases on Australian issued cards around 15 times larger than BNPL transactions in the December quarter of 2021.

… including a small share of borrowers who could struggle to service their debts as a result of higher interest rates and/or inflation

….Around 60 per cent of all borrowers currently have variable-rate loans, with around two-thirds of these being owner-occupiers. Scenario analysis using information in the Securitisation dataset indicates that if variable mortgage rates were to increase by 200 basis points:

• just over 40 per cent of these borrowers made average monthly payments over the past year that would be large enough to cover the increase in required repayments (Graph 2.6)

• a further 20 per cent would face an increase in their repayments of no more than 20 per cent

• around 25 per cent of variable-rate owner-occupiers would see their repayments increase by more than 30 per cent of their current repayments; however, around half of these borrowers have accumulated excess payment buffers equivalent to one year’s worth of their current minimum repayments that could therefore help ease their transition to higher repayments

• the share of borrowers facing a debt servicing ratio greater than 30 per cent (a commonly used threshold for ‘high’ repayment burdens) would increase from around 10 per cent to just under 20 per cent.

One caveat is that households’ average monthly mortgage payments over the past year may have been larger than might reasonably be expected going forward, especially as previous spending patterns resume alongside the recovery in economic activity. It is difficult to draw inferences about the capacity of investors with variable-rate loans to make higher repayments, as they tend not to make excess mortgage payments (and other forms of saving are less visible in available data).

Most borrowers with fixed-rate loans are also likely to be able to handle the increases in their repayments when their fixed-rate terms expire. 

Many borrowers have taken advantage of very low interest rates on fixed-rate products in recent years; in late 2021, almost 40 per cent of outstanding housing lending had fixed interest rates – roughly double the share at the start of 2020. Around three-quarters of currently outstanding fixed-rate loans will expire by the end of 2023……

Read the full analysis here.

Reserve Bank of Australia dumps emergency $14.7 billion into banking system and states intention to buy up Morrison Government debt, as financial system is stressed by COVID-19 pandemic

Reserve Bank of Australia, media release, 16 March 2020:

Statement by Philip Lowe, Governor

As Australia's financial system adjusts to the coronavirus (COVID-19), financial regulators and the Australian Government are working closely together to help ensure that Australia's financial markets continue to operate effectively and that credit is available to households and businesses. (Refer to earlier Council of Financial Regulators' (CFR) press release.) Australia's financial system is resilient and it is well placed to deal with the effects of the coronavirus. At the same time, trading liquidity has deteriorated in some markets. 

In response, the Reserve Bank stands ready to purchase Australian government bonds in the secondary market to support the smooth functioning of that market, which is a key pricing benchmark for the Australian financial system. The Bank will also be conducting one-month and three-month repo operations in its daily market operations until further notice to provide liquidity to Australian financial markets. In addition the Bank will conduct longer term repo operations of six-months maturity or longer at least weekly, as long as market conditions warrant. The Reserve Bank and the AOFM are in close liaison in monitoring market conditions and supporting continued functioning of the market. 

The Bank will announce further policy measures to support the Australian economy on Thursday. 

Channel 9 News, 16 March 2020:

The Reserve Bank has pumped extra liquidity into the banking system, part of a package of measures aimed at ensuring business and households have access to credit as the coronavirus causes chaos in global financial markets.

The RBA used its daily money market operation to add $5.9 billion to the system through regular repurchase agreements, well above its original intention of $2.5 billion.

That followed an injection of $8.8 billion on Friday, which had left commercial banks with a hefty $10.7 billion of surplus cash held at the RBA.....

Australian economy has grown weaker and workers paypackets leaner under the Abbott-Turnbull-Morrison Government

ABC News, 11 May 2019:

Australia's "strong economy" has been the Coalition's mantra throughout the election campaign.

Earlier this month, the Liberal Party created a meme of a smiling Scott Morrison armed with a lightsaber and dressed as a Jedi alongside the slogan: "The economy is strong with this one."

In Treasurer Josh Frydenberg's Budget speech, the phrase "strong economy" featured 14 times.

And Labor, loathe to campaign on what it sees as the Coalition's territory, has barely challenged this proposition.

Yet the evidence suggests the claim is more rhetoric than reality.

On just about any measure, the economy is not strong — and any enduring pretensions that it is have been undermined by no less an authority than the Reserve Bank of Australia (RBA).

Its latest monetary policy statement has revised down economic growth for this financial year to just 1.7 per cent — more than half a percentage point below its previous forecast.

That contradicts Treasury forecasts in the Budget, which are barely a month old and were reaffirmed by Treasury even more recently in the pre-election economic and fiscal outlook.

Wages growth, despite a recent small pick-up, has been weaker during the past six years than at any time since World War II.

Home values and household wealth have plummeted amid one of the biggest property slumps in Australia's history.

The inflation rate is at a historic low of just 1.3 per cent and has languished below the Reserve Bank's target range of 2 to 3 per cent for more than three years.

Although employment growth has been reasonably strong, driven by the public sector and community services, key sectors that drive the economy are shrinking.

Manufacturing, construction and retail trade have all shed tens of thousands of jobs over the past year — the building industry layoffs are a product of a massive slump in dwelling investment, which the RBA reckons will continue for years.

Some better headline data mask gloomier realities

Only high rates of immigration have stopped Australia lapsing into a formal recession.

The continued expansion — now in its 28th year, the longest period without a recession in recent world history — disguises a "per capita" recession that is driving down living standards.

Similarly, an unemployment rate mired at 5 per cent, which is not high by the standards of recent decades, disguises the true weakness of the labour market.

More than 13 per cent of the workforce is underutilised — either unable to secure work at all or the hours they need — and a disproportionate share of the jobs growth in recent times has been poor quality: casual and contract jobs in relatively low-wage, low-productivity sectors.

The Reserve Bank is betting on the unemployment rate staying where it is, but others are less optimistic.

Westpac's Bill Evans, one of the most long-standing and respected market economists, predicts that developments in the labour market over the next three months will disappoint the RBA with a "deterioration of the labour market" over the coming six months and "continued weak inflation".

This downturn in the economy is largely homegrown — the product of weak wages growth and the unwinding of an unsustainable property boom that left households saddled with enormous debts.

If there's also an external shock, perhaps from a trade war sparked by Donald Trump's tariffs on our largest trading partner China, it will open up the possibility of a double-whammy.

Yogi Berra, the legendary US baseball star and coach, famously observed that "it's tough making predictions, especially about the future", and it's a maxim that's often born[e] out in economic forecasting.

But you don't need a crystal ball to realise that whoever forms government after the federal election will inherit a sluggish economy, not a strong one.

ABC News, 12 May 2019:

The Reserve Bank's new line in the sand gets its first big test with the latest reading from the jobs market this week.

The new line, as set down in the RBA's latest Statement on Monetary Policy (SOMP), can be roughly defined as the unemployment rate holding at 5 per cent through 2019 and 2020 before drifting lower.

The persistent head-winds of low inflation has seemingly blurred, if not blown away, the RBA's previous markers — parallel lines which were intended to corral inflation between 2 to 3 per cent for as far as the eye can see, or an economist can forecast.

Governor Philip Lowe made it clear a further improvement in the labour market was needed to get the economy out its rut and back in the groove, growing at its full potential.

No back-tracking on this one for the RBA. Lower unemployment and underemployment — where workers are searching for more hours to make ends meet — will soak up the spare capacity sloshing around the economy, inflation gets back to where the RBA wants it and GDP grows at its long term trend, or better.

That's still a long way off, even using the RBA's recently updated and far from pessimistic forecasts......

According to the Australian Bureau of Statistics, over the twelve months to the March quarter 2019 the living costs for self–funded retiree households fell by -0.2%, while the living costs for age pensioner households and other government transfer recipient households rose by 0.3% and 0.2% respectively. Employed households living costs remained unchanged over the same time period at 0.1% above CPI.

It should be noted that penalty rates for retail workers will be further reduced by 15% of the base wage rate on 1 July 2019 and 1 July 2020 as per Fair Work Commission 2017 decision.