RBA: Unemployment to rise, helicopter money ruled out

author-avatar By
on July 21, 2020
RBA: Unemployment to rise, helicopter money ruled out

Photo by Nathan Hurst on Unsplash

Australia's central bank Governor said unemployment is set to rise further as the scars from COVID-19 deepen.

Addressing the Anika Foundation on Tuesday, Reserve Bank (RBA) Governor Phillip Lowe said even despite signs of recovery, the path forward for the labour market was uncertain. 

"This is because many of the people who lost their jobs over recent times have been classified as not in the labour force and so are not counted as unemployed," Dr Lowe said.

"As the labour market continues to improve, we expect many of these people will start looking for jobs, and thus be classified as rejoining the labour force.

"This will push up the measured unemployment rate at the same time that the share of the working-age population with a job is also rising." 

Need somewhere to store cash and earn interest? The table below features introductory savings accounts with some of the highest interest rates on the market.

Lender

4000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • Special intro rate
  • No ongoing fees
  • No minimum balance

Online Saver (Amounts < $499999)

  • Special intro rate
  • No ongoing fees
  • No minimum balance
001$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details
  • Take money out at any time without affecting your bonus rate.
  • Open up to 10 Save accounts and get bonus interest on all of them, including shared Save accounts.
  • Get bonus interest on a combined balance of up to $250K across all your Save accounts.

Save Account (< $100,000)

  • Take money out at any time without affecting your bonus rate.
  • Open up to 10 Save accounts and get bonus interest on all of them, including shared Save accounts.
  • Get bonus interest on a combined balance of up to $250K across all your Save accounts.
02000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

PremiumSaver (Amounts < $250k)

    3000$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

    Serious Saver (<$1m)

      0100$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

      mySaver < $50k

        4001$product[$field["value"]]$product[$field["value"]]$product[$field["value"]]More details

        WebSavings Account (New Customer) ($2,000+)

          Rates based on a savings balance of $10,000. Sorted by total interest rate. Refer to providers' websites for bonus rate conditions. Note that the base rate will apply once the introductory term has passed. Rates correct as of July 3, 2022. View disclaimer.

          Dr Lowe said until scientific breakthroughs were made or we become better at managing the virus, incomes would be temporarily lower.

          He also said although the figures in April and May - which showed employment fall by around 870,000 people - were staggering, Australia had now turned the corner. 

          "In June, hours worked increased by 4% and the number of employed people rose by 210,000," he said.

          "Notwithstanding this turnaround, the path ahead is expected to be bumpy and there are some major cross-currents in the labour market at the moment."

          Prime Minister Scott Morrison today announced a tapered extension to JobKeeper and JobSeeker, and Dr Lowe said both schemes were vital for recovery. 

          "By helping the economy today, these measures also support the all-important confidence that I spoke about earlier," he said.

          "So they assist with a return to more normal patterns of spending and consumption, without the need for ongoing fiscal stimulus." 

          Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

          Lender

          Variable
          More details
          UNLIMITED REDRAWSSPECIAL OFFER
          • Fast turnaround times, can meet 30-day settlement
          • For purchase and refinance, min 20% deposit
          • No ongoing or monthly fees, add offset for 0.10%
          UNLIMITED REDRAWSSPECIAL OFFER

          Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

          • Fast turnaround times, can meet 30-day settlement
          • For purchase and refinance, min 20% deposit
          • No ongoing or monthly fees, add offset for 0.10%
          Variable
          More details
          100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
          • No upfront or ongoing fees
          • 100% full offset account
          • Extra repayments + redraw services
          100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

          Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

          • No upfront or ongoing fees
          • 100% full offset account
          • Extra repayments + redraw services
          Variable
          More details
          QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS
          QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS

          Variable Home Loan (Principal and Interest)

          • $5000 Cashback. T&Cs Apply.
          Variable
          More details
          REFINANCE ONLY
          • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
          REFINANCE ONLY

          Variable Rate Home Loan – Refinance Only

          • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
          Variable
          More details
          NO ONGOING FEESFREE REDRAW FACILITY
          • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
          NO ONGOING FEESFREE REDRAW FACILITY

          Live-in Variable Loan (Principal and Interest) (LVR < 90%)

          • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

          Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of July 3, 2022. View disclaimer.

          "There's no free lunch" 

          Dr Lowe also used his address to rule out the possibility of Modern Monetary Theory (MMT), whereby the RBA deposits money in every bank account in Australia, also known as helicopter money. 

          The RBA has the ability to create money and avoid financial constraints, offering a free lunch of sorts. 

          "So the argument goes, if the government needs money to stimulate the economy, the central bank should simply create it in the public interest," Dr Lowe said.

          "The reality, though, is there is no free lunch. The tab always has to be paid and it is paid out of taxes and government revenues in one form or another."

          Dr Lowe said helicopter money could push inflation up too drastically, so the central bank would have to hike the cash rate, meaning the general population would end up funding the system. 

          "So I want to make it very clear that monetary financing of fiscal policy is not an option under consideration in Australia, nor does it need to be," he said. 

          "The Australian Government is able to finance itself in the bond market, and it can do so on very favourable terms."

          Dr Lowe reaffirmed the Board had no appetite for negative interest rates in Australia, as it would encourage people to save more, rather than spend more, which is not the direction we needed to head in. 


          Disclaimers

          The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

          Latest Articles

          author-avatar
          Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

          Collections:

          Be Savings smart.
          Subscribe for free money newsletters.

          By subscribing you agree
          to the Savings Privacy Policy