RBA Minutes: Aussie is aligned with its fundamental determinants – TDS

The RBA Minutes revealed the Bank retaining a cautiously optimistic outlook and while domestic data has been less bad than feared acknowledged risks to the global economy have increased. The RBA discussed monetary policy alternatives as well, objects to direct debt monetisation and sees no benefit of FX intervention. The Australian Treasurer also announced the latest JobKeeper and JobSeeker updates, per TD Securities.

Key quotes

“The Bank acknowledged that outcomes had been less bad than initially feared, with particular focus on the labour market: ‘Conditions in the labour market had been very weak, but not as severe as expected a few months earlier’ ‘The peak-to-trough decline in total hours worked was now expected to be closer to 10 per cent than the 20 per cent decline expected earlier.’ ‘Payroll data also suggested that the worst of the job losses was likely to have passed’.” 

“The Bank discussed monetary policy alternatives. It reiterated its objection to pursue negative rates, little benefit to intervene in the FX market and push the AUD lower (‘the exchange rate is broadly aligned with its fundamental determinants’) or direct financing of Government bond issuance.”

“JobKeeper has been extended to end Q1 2021 and is expected to cost A$16 billion. JobSeeker has been extended to end Q4 2020 and is expected to cost A$3.8 billion. The extension to these programs is therefore expected to cost A$20 billion. This is below what we and the market was anticipating and it appears the tightening in eligibility criteria is likely behind the lower costing.”