Australia's central bank has injected $8.8 billion into the financial system in an effort to calm markets.
The emergency cash splash follows similar moves from the US Federal Reserve and European Central bank overnight in response to liquidity issues in the financial system amid market panic over the coronavirus pandemic.
The Dow Jones saw its worst day since 1987 overnight, plunging 10%, after investors panicked with the news that President Donald Trump was closing the American borders to European travellers.
The Reserve Bank (RBA) added $8.835bn of liquidity via its repo operations, whereas just $1.925bn in repurchases were maturing, resulting in a net addition of $6.91bn of liquidity injected into the system.
In layman's terms, the move essentially means the RBA is providing short term loans to commercial banks in return for collateral.
Repurchase agreements are where commercial banks temporarily swap collateral such as bonds and residential mortgage-backed securities (RMBS) in return for RBA cash.
The intervention was made amid increasing fears that companies are hoarding cash, with the COVID-19 pandemic extracting a heavy toll on global markets as traders panic sell.
The additional liquidity helped the Australian Stock Exchange (ASX) rebound from a four year low at first before falling back down to 6.8%.
However the afternoon has seen a further recovery, after Prime Minister Scott Morrison announced a ban on gatherings of 500 or more.
At the time of writing, the share market was up 1.41% for the day.
After cutting Australia's cash rate to a record low 0.5%, the RBA is being forced to utilise weapons in its arsenal other than rate cuts.
Today's intervention is not quantitative easing, something the central bank has said it is willing to use but only if completely necessary.
Quantitative easing is the direct purchase of government bonds, whereas today the RBA injected funds into the financial system to increase liquidity to ease pressure on credit markets.
The government looked to assist the RBA yesterday, announcing a $17.6 billion stimulus package, where pensioners and welfare recipients will receive a one-off $750 payment.
What does this mean?
The RBA's move today is nigh unprecedented and stops only just short of quantitative easing.
The tumbling of global markets is something we last saw in the global financial crisis.
However we're in uncertain times: This pandemic is quite unprecedented, and as such, the future is unpredictable.
Even despite the fiscal and monetary policy from the government and RBA, a technical recession seems likely, according to Westpac economist Bill Evans.
"Our analysis of the (stimulus) package suggests that the initiatives are only likely to offset the contraction in the June quarter that we had estimated earlier in the week rather than lift growth into positive territory," Mr Evans said.
"However, the current domestic and global environment has deteriorated more rapidly than we had expected.
"The downside risks to our central case forecast that we envisaged earlier in the week are now materialising. For us, despite the Government’s bold efforts the June quarter is still likely to show negative growth and Australia will experience a technical recession."
Commbank Chief Economist Craig James echoed Mr Evans sentiment, commending the stimulus packages but warning they could be insufficient.
"Overall the package won’t supercharge the economy. Neither does it guarantee that the economy won’t slip into recession," he said.
"But it is a good first step. The measures are indeed targeted and temporary.
"As to whether the measures are proportionate remains to be seen – it is an evolving situation."
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