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Lowe Says Monetary Policy Is Working as RBA Joins Race to Bottom
2019-10-01 09:20:00.3 GMT

By Chris Bourke
(Bloomberg) — Australia’s central bank chief reaffirmed
his faith in monetary policy just hours after cutting interest
rates for a third time this year, despite the earlier moves so
far mainly serving to refuel the housing market.
While the Reserve Bank board decided to cut the cash rate
to a record-low 0.75% on Tuesday, it recognized that there were
some undesirable effects from cutting rates, Governor Philip
Lowe said. He mentioned the “many people” who wrote to him
complaining that low rates were hurting their finances.
“The Board also recognizes that monetary policy still
works,” Lowe said in notes of a speech delivered at a board
dinner in Melbourne. “It works to support employment, jobs and
income growth across the economy. Today’s decision, together
with our decisions in June and July, will assist on each of
these fronts.”
Click here to read more about Tuesday’s rate decision
In remarks mainly recapping the content of Tuesday’s policy
statement, Lowe repeated his new favorite mantra: that
Australia’s economy “appears to have reached a gentle turning
point.” He said while the economy had been through a soft patch,
the central bank’s board expected a return to “around-trend”
growth over the next year.

FSR Preview

Lowe also outlined the board’s discussion on financial
stability issues at its meeting Tuesday, ahead of the release of
the six-monthly Financial Stability Review on Friday. He
highlighted three key talking points:
* The disconnect between the uncertainty that investors feel
about the economic situation and the compensation that they
require for holding risk. A shock somewhere in the global system
could cause a recalibration, leading to a disruptive repricing
of risk
* Australia’s banks are well-placed to withstand a wide range of
shocks — but while lending standards have strengthened, in some
areas “the pendulum may have swung a bit too far”
* While the Australian household sector has a high level of
debt, it has also built up substantial buffers. While loan
arrears have risen over recent years, they remain low

To contact the reporter on this story:
Chris Bourke in Sydney at cbourke4@bloomberg.net
To contact the editors responsible for this story:
Nasreen Seria at nseria@bloomberg.net
Malcolm Scott