Philip Lowe, governor of the Reserve Bank of Australia, said he was watching the current outbreak caused by a variant of novel coronavirus Delta and was willing to take measures to deal with it if health conditions deteriorated. The current epidemic has prompted some big cities in Australia to impose blockades.
Policymakers are "ready to take action to deal with further bad health news that will affect the economic outlook for the coming year," Lowe said in an opening speech at a three-hour congressional hearing on Friday.
For now, however, the central bank is sticking to its plan to scale back its bond purchases, believing that the economy will recover quickly from the contraction caused by the epidemic this quarter. With the spread of the Delta variant, a blockade is being imposed in areas that account for about 2/3 of Australia's population, with Sydney being the worst and Melbourne issuing a home order.
The Reserve Bank of Australia said additional bond purchases would now mainly help the economy until next year, when the economy should already be recovering, making government spending a faster and better option.
"Fiscal policy is a more appropriate tool to provide support in the face of temporary local shocks to revenues, and the committee welcomes the large number of fiscal responses introduced by the Australian government," Lowe said.
State and federal governments have provided cash and other support to businesses and families unable to work under the restrictions of the epidemic to help them and the Australian economy tide over the difficulties.
"according to a rough rule of thumb, household consumption in blocked areas is generally about 15 per cent lower than normal," Lowe said. "in addition, the blockade directly affected construction activities in New South Wales and led to the postponement of some investment plans."
Influenced by Lowe's remarks, the Australian dollar fell slightly against the US dollar, trading at US $0.7387 at 11:23 Sydney time.