Goldman Sachs economists say the Reserve Bank of Australia’s (RBA) internal model suggests a $200 billion bond buying program may be needed to achieve its unemployment and inflation target, according to the Australian Financial Review.
The report adds further that the central bank may be one or two rate cuts away from exhausting traditional policy tools. The RBA, however, is reuluctant to use negative rates.
Key points
We estimate that an equivalent degree of stimulus could be approximated by a $200 billion QE program.
We continue to see a material risk that the RBA will deliver even deeper rate cuts and be drawn into unconventional policies.
For now, however, this remains outside our central scenario given Governor Lowe’s concerns about financial stability risks from loose monetary policy.
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