Fiscal joins monetary policy to minimize coronavirus shock – ANZ

Ahead of the key interest rate decision from the RBA, the Australia and New Zealand banking group (ANZ) anticipate the Australian government’s fiscal efforts to join the monetary policy actions in order to counter coronavirus (COVID-19) shock to the economy.

Key quotes

We expect fiscal assistance to be deployed soon, in coordination with monetary policy, to minimize the damage from the COVID-19 shock to the economy.

Australia’s Treasurer said in Parliament on 2 March, that government action would be ‘considered, responsible and targeted’. The word “modest” used last week was gone. We see this as intentional.

There is also scope for state governments to assist, as the Queensland and Tasmanian governments have done with minor policy changes in recent days.

We expect to see more state-level measures deployed in the coming weeks.

While this fiscal assistance won’t stop GDP from falling in Q1, it does reduce (though not eliminate) the prospect of a second successive negative quarter.