Payments volumes tanked in October, providing a bleak background to the Reserve Bank’s well-telegraphed easing of monetary policy settings yesterday.
Monthly data shows the daily average RTGS volumes fell by A$9 billion to $185.4 billion in October. This is 84 per cent of the payments volume one year ago.
The October payments volumes are also 94 per cent of the daily average over the September quarter, so the drag of the extended pandemic lockdown in Melbourne looks material; though the RBA, turning optimistic, now projects GDP growth over the year to June 2021 of “close to 6 per cent, compared with an expectation of 4 per cent growth when we reviewed our forecasts three months ago”.
With its new found-zeal for “addressing the high rate of unemployment as a national priority” the RBA yesterday reduced the cash rate target, the three-year bond yield target and the interest rate on new drawings under the Term Funding Facility to 10 basis points, from the current 25 basis points.
“Over recent months we have learnt more about the pandemic and its economic impact,” the RBA governor Philip Lowe said in a speech late yesterday.
“As the months have passed, it has become increasingly apparent that there will be long-lasting effects, including high unemployment. While the outlook does remain uncertain, we do have a somewhat clearer picture of the future state of the labour market.
“A sharp bounce-back in jobs is unlikely and it will take time to return to where we were before the pandemic. We have responded to this clearer picture today.
“The second factor is that monetary easing is likely to get more traction today than it would have when widespread restrictions were in place. In earlier months, the usual transmission mechanisms were not working as normal and the challenges facing the country were best addressed by other policy tools.
“However, as restrictions are eased and people have more opportunities to spend, our judgement is that further monetary easing now provides additional support to other policies, including the fiscal initiatives and the RBA's earlier monetary policy package.”
Lowe offered a routine nod toward “the impact on savers”.
“The RBA board recognises that low rates can encourage some additional risk-taking, as investors search for yield,’ Lowe said.
“It also recognises that low deposit rates can create difficulties for some people. These issues will need to be closely watched over the months ahead.
“But the RBA judged that the bigger risk at the moment was the threat to our economy and to balance sheets from an extended period of high unemployment. Today's decision will lessen that risk.”