Following two rate cuts last month, the RBA said it has decided to keep rates at 0.25 of a percentage point as it attempts to support the economy weighed down by the coronavirus crisis.
“At its meeting today, the board reaffirmed the targets for the cash rate and the yield on three-year Australian government bonds of 25 basis points, as well as the other elements of the package announced on 19 March 2020,” RBA governor Philip Lowe confirmed.
Acknowledging the “significant effects” the coronavirus is having on economies and financial systems around the world, Mr Lowe admitted there is considerable uncertainty about the near-term outlook for the Australian economy, but he predicted a “very large economic contraction”.
“Much will depend on the success of the efforts to contain the virus and how long the social distancing measures need to remain in place,” Mr Lowe said.
“A very large economic contraction is, however, expected to be recorded in the June quarter, and the unemployment rate is expected to increase to its highest level for many years.”
The Governor opined that the coordinated monetary and fiscal response, together with complementary measures taken by Australia's banks, will soften the expected contraction and help ensure that the economy is well placed to recover once the health crisis has passed and restrictions are removed.
"These various responses are providing considerable support to Australian households and businesses through what is a very difficult period," he said, characterising the Australian financial system as resilient.
"It is well capitalised and in a strong liquidity position, with these financial buffers available to be drawn down if required to support the economy," Mr Lowe added.
Last month, following an emergency rate cut of 0.25 per cent, the RBA offered a $90 billion lending facility to banks to back lending to small business.
Speaking about its comprehensive policy package on Tuesday, Mr Lowe said it too will support the expected recovery.
In closing his speech, the Governor confirmed the board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.
"The board wishes the best to all Australians as our country deals with this very difficult situation," Mr Lowe concluded.