Further action?
Interesting figures this week showed that Australian credit card has plummeted as the government's stimulus packages left consumers flush with cash to repay their debts.
Personal credit growth remained mired at -3.4 per cent year-on-year in June, and the repayment of consumer debt was one factor in the weak annual credit growth figures.
Meanwhile luxury car sales have jumped higher, and not only in Australia, as wealthier consumers have had to find something other than travel to do with their discretionary spending.
So there are some interesting trends afoot, and they aren't all what you might expect.
#Brrr
M3 and broad money growth moved into double-digit growth territory in June as policy kicked into gear.
The Reserve Bank implemented yield control in Australia, targeting a 3 year bond yield of 0.25 per cent, and executing $50 billion of government bond purchases.
The bank confirmed on July 7, however, that no purchases had been made for some time, and since mid-July RBA assets have declined.
Policy decision
The Reserve Bank meets on Tuesday and economists are debating whether the RBA will cut the official cash rate further, from 0.25 per cent to 0.10 per cent, as the state of Victoria continues to record more cases of COVID-19.
Although new case numbers are off their highs, the Victorian economy is now set to be shuttered for another month with a range of even more severe restrictions.
Being the maker of these decisions must be an unenviable position to be in, especially as the correlation between shutting down businesses and the actual spread of the virus appears to be so loose, but that's what's coming for Victoria regardless.
This is a tremendous constraint on the output of the Australian economy given that Victoria alone accounts for close to a quarter of GDP, and that's even before factoring in the associated impact these measures will have on other states.
Whether or not that the RBA actually decides to cut to 0.10 per cent is another question, but it would send a clear message that the bank is prepared to do whatever it takes to get the economy back on an even keel.
To the casual observer, such as myself, there's been apparently little widespread belief in the commitment to hitting the inflation target or closing the output gap for some years now.
A rate cut would also help to resuscitate a dithering housing market and construction sector, as has been achieved in the US, and to a lesser extent in the UK, with Victoria's housing market facing a 6-week dearth of sales.
