RBA: Australia faces renewed taper debate as sluggish recovery looms – Bloomberg

“Australia’s central bankers are set to revisit the question of whether to delay a planned taper of bond purchases as a worsening outbreak of the delta variant dims prospects of a rapid economic rebound,” said Bloomberg late Sunday.

“Reserve Bank of Australia will defer scaling back quantitative easing on Tuesday,” Ten of 16 economists surveyed.

Key quotes

That’s despite Governor Philip Lowe saying after August’s meeting that the impact of such a move wouldn’t help the economy much and that the government was better placed to offer support.

At its previous meeting in August, the RBA held on to its plans to scale back weekly bond purchases from September to A$4 billion ($3 billion) from A$5 billion. 

While the economy has since weakened from lengthy lockdowns, the global backdrop provides some cover for the RBA sticking to its decision again.

The Federal Reserve and the European Central bank are signaling a cautious winding back of stimulus later this year. 

Yet the RBA also said in minutes of its August meeting that it was prepared to respond if further bad health news led to a ‘significant setback’ for the recovery.

What’s changed in the interim is virus strategy. New South Wales and Victoria states, accounting for about 55% of gross domestic product and both largely locked down, are aiming to vaccinate their way out of the delta crisis rather than drive cases back to zero. 

That suggests a more gradual lifting of restrictions as opposed to broad-based removals that allowed a V-shaped economic recovery through late 2020 and early 2021.

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