To no one’s surprise, today the Reserve Bank of Australia left the cash rate on hold.

Victoria's tightening lockdown, has the potential to knock-off at least $12bn from the Victorian and national economy, so Australian GDP growth looks as if it could be delayed until the December quarter. This further hit to the economy (and likely additional upwards pressure on unemployment) is also increasing pressure for more policy stimulus, and is likely to see the federal budget deficit this year ultimately pushed up to $235bn (from the Government's recent projection of $184.5bn).

While the RBA left monetary policy on hold at its August meeting further easing is likely ahead - it could take the form of a rate cut to 0.1% but the focus is likely to be on more ‘quantitative easing’ beyond simply targeting the 3 year bond yield at 0.25% (ie what's often called Yield Curve Control).

We’ll keep you posted.

Rick Maggi