424%. Consider Figure 2, showing the recent lift in the size of the RBA’s balance sheet which has been almost exclusively explained by an increase in holdings of financial securities.In this regard it is interesting to look forward and track the impact that the Covid Crisis has had and is likely to have on the government and central bank balance sheets of Australia and the US.Readers will be aware that on March 31 Westpac forecast that the Australian bond supply would have to lift by an additional $310bn over the course of 2020 and 2021 to finance the bulging Federal budget deficit associated with an increase in the cyclical deficit ($120bn) and the cost of the government’s stimulus policies (around $190bn – about 10% of GDP).The stimulus policies include the $130 billion which has been the forecast cost of the JobKeeper Payment, budgeted for 6 million workers (around 46% of the workforce). We use analytics cookies so we can keep track of the number of visitors to various parts of the site and understand how our website is used. The RBA is going to boost its balance sheet significantly beyond the recent increase of $70bn. Five million workers are covered by mining; agriculture; construction; finance; government and professional services while 1.7 million work in health and 1.1 million in education.It is unlikely that a very high proportion of employers in these industries, including major banks that are specifically excluded, will qualify for the payments. Quarter News and publications
Lower government debt allows scope to use fiscal policy to boost growth; restricts the impact on the deficit of funding costs; and generally implies that the government has not been “crowding out” the private sector from borrowing.A stable central bank balance sheet indicates that the financial system is operating efficiently precluding the need for the central bank to intervene in the operations of the financial system. RBA Balance Sheets (Quarterly, GAAP in millions $) (Mar 31 2020) I. Holding the three year bond rate at 0.25% when the cash rate target is also 0.25% indicated that the RBA and the markets expect the cash rate to hold at 0.25% for the next three years. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties.
(RBA) Balance Sheet.
96%. Compare that with the US Federal Reserve which will eventually expand its balance sheet from around $4tn to up to $9tn, including around $1.5tn in short and long-term repos; $1.6tn in Treasuries and mortgage backed securities (both already transacted); $750bn in corporate bonds and syndicated loans; $600bn in small business loans; and $500bn in local government loans (last three still to come).Note also that the FED was unable to sustainably taper its balance sheet following the original build up from USD1tn to $4tn in the aftermath of the GFC.That expansion of the FED’s balance sheet would represent an increase in the balance sheet from 20% of GDP to around 45% of GDP over the Covid period. Last week we forecast that the RBA would hold the cash rate steady at 0.25% out to at least December 2023.We argued that the unemployment rate and other measures of spare capacity in the labour market, such as the underemployment rate, would hold well above those levels which the RBA would assess as being consistent with their objectives (full employment of 4.5%) over that period.Recall that the unemployment rate entered the Covid Crisis period at around 5% and is likely to reach 9% by June.In the last two recessions in the early 1980’s and the early 1990’s it took nearly 9 years and 12 years respectively for the unemployment rate to return to the prerecession levels. 208%.
The results ultimately achieved may differ substantially from these forecasts.ActionForex.com was set up back in 2004 with the aim to provide insight analysis to forex traders, serving the trading community over a decade. The US government has already announced stimulus of around USD2.5 trillion and, unlike Australia, considerably more is expected – our estimates point to around another USD1.5 trillion. Quarter (Sep 30 2019) III.
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Of course the objectives are interdependent with persistent spare capacity in the labour market very likely to weigh on wages growth and therefore inflation.
RBA on Hold; a Tale of Two Government Balance SheetsBy continuing to browse our site you agree to our use of cookies, privacy policy and terms of service.