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RBA predicted to cut rates to curb coronavirus hit

The Reserve Bank is predicted to slash rates today in an effort to protect the economy from sliding into recession on the back of the coronavirus threat.

RBA predicted to cut rates to curb coronavirus hit
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  • Maja Garaca Djurdjevic
  • March 03, 2020
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Australia is sighted to be one of the countries most affected by the economic fallout of the coronavirus, the OECD said on Monday evening in a report outlining the global threat of COVID-19.

The OECD characterised the virus as the greatest danger to the global economy since the global financial crisis, explaining that global growth could tighten to just 1.5 per cent if the virus continues to spread across Europe and North America.

“The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions," said OECD chief economist Laurence Boone.

"Governments need to act immediately to contain the epidemic, support the health care system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected".

The OECD added that Australia could be one of the countries hit hardest by the outbreak given its dependence on China.

“The adverse impact on confidence, financial markets, the travel sector and disruption to supply chains contributes to the downward revisions in all G20 economies in 2020, particularly ones strongly interconnected to China, such as Japan, Korea and Australia,” the report reads. 

It explained that Australia should look at stimulus measures, including additional precautionary reductions in policy interest rates, to restore confidence and reduce debt-servicing costs.

As such, local analysts are predicting that the Reserve Bank will opt for an emergency rate cut today to at least 0.5 per cent, given the coronavirus threat and the lasting impacts of the recent bushfires. 

The RBA is scheduled to publish its decision this afternoon.  

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