RBA’s Bullock’s speech says nothing on monetary policy.

Key notes

• RESERVE BANK OF AUSTRALIA ASSISTANT GOV BULLOCK SAYS COVID-19 HAS ACCELERATED SHIFT FROM CASH TO ELECTRONIC PAYMENTS
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS COSTS TO MERCHANTS OF ELECTRONIC PAYMENTS MUST BE KEPT AS LOW AS POSSIBLE
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS MAY NEED TO CONSIDER REGULATORY OPTIONS FOR KEEPING COST OF ELECTRONIC PAYMENTS LOW
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS MAY NEED TO CONSIDER LOWERING BENCHMARKS THAT CAP INTERCHANGE FEES
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS SEEMS LIKELY LARGE PART OF THE SHIFT FROM CASH WILL BECOME PERMANENT
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS SHARP FALL IN USE OF ATMS ADDS TO PRESSURE TO CONSOLIDATE ATM SYSTEM
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS NEED TO ENSURE RESILIENCE OF PAYMENTS SYSTEM AS CONSUMERS MOVE FROM CASH
• 02-Jun-2020 19:10:00 – RBA’S BULLOCK SAYS CHEQUE SYSTEM INEFFICIENT AND COSTLY, MAY NEED TO BE SHUT DOWN

RBA’s optimistic outlook

As noted by analysts at ANZ Bank, the RBA gave an optimistic outlook and noted the improving global state of the pandemic:

Over the past month, infection rates have declined in many countries and there has been some easing of restrictions on activity. If this continues, a recovery in the global economy will get underway, supported by both the large fiscal packages and the significant easing in monetary policies.

Financial markets are more positive about the outlook and not just equities:

‘Globally, conditions in financial markets have continued to improve, although conditions in some markets remain fragile. Volatility has declined and credit markets have progressively opened to more firms,’ – RBA.

The Australian economy “is experiencing the biggest economic contraction since the 1930s”, but there are some encouraging signs:

It is possible that the depth of the downturn will be less than earlier expected. The rate of new infections has declined significantly and some restrictions have been eased earlier than was previously thought likely. And there are signs that hours worked stabilised in early May, after the earlier very sharp decline. There has also been a pick-up in some forms of consumer spending,’ – RBA.

Lastly, and most key, is that the RBA has largely chosen not to purchase bonds since the last meeting:

The government bond markets are operating effectively and the yield on 3-year Australian Government Securities (AGS) is at the target of around 25 basis points. Given these developments, the Bank has purchased government bonds on only one occasion since the previous Board meeting,’ – RBA.

Next up, global markets are getting set for Australia’s first-quarter (Q1) Gross Domestic Product (GDP) figures at the top of the hour.

• When is the Aussie Q1 GDP release and how could it affect the AUD/USD?

About Michele Bullock

Michele Bullock is the Assistant Governor (Financial System) at the Reserve Bank of Australia. Bullock was appointed to her current position in October 2016. In this role, she is responsible for the Bank’s work on financial stability, including production of the twice-yearly Financial Stability Review, as well as the Bank’s oversight of the payments system.