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The government’s $42 billion stimulus package and the Reserve Bank’s substantial easing of monetary policy should work to establish a stronger economy before the year is out, according to the central bank.
In its February monetary policy meeting minutes released yesterday, the RBA indicated that it was likely to proceed more cautiously with future rate decisions, expressing confidence that current macroeconomic policy measures would provide a significant boost to the economy – although it could take some time.
“Together with earlier rate cuts, this [February’s 1 per cent reductions] would amount to a very significant easing of monetary policy,” the minutes read.
“With the fiscal measures this meant that a very significant macroeconomic stimulus had been applied to the domestic economy.”
Short-term prospects were still for weak demand and output however these measures “would help to cushion the economy from the contractionary forces coming from abroad”, the bank said, and “work to establish conditions conducive to stronger demand later in the year”.
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