RBA to give its view on difficult outlook

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Reserve Bank governor Philip Lowe admits trying to forecast the economic outlook is difficult in the face of a pandemic and Victorias tougher coronavirus restrictions have no doubt made it even more complex. The Reserve Bank will release its quarterly statement on monetary policy on Friday, which will contain its latest economic forecasts. Dr. Lowe gave a flavor of what to expect in his post-board meeting statement on Tuesday after leaving the cash rate at a record-low 0. 25 percent. The central bank's baseline case is that growth will drop six percent this year as the economy suffers its first recession in nearly 30 years before rebounding by five percent in 2021. This will see unemployment rise to about 10 percent by year-end as a result of the Victorian lockdown causing further job losses and more people elsewhere in Australia seeking work. In the next couple of years, the unemployment rate is expected to decline gradually to about seven percent. The Australian Treasury also revised up its jobless forecast on Thursday to about 10 percent, having previously predicted a peak of 9. 25 percent, an outlook Prime Minister Scott Morrison said was a "heavy blow". The jobless rate was already 7. 4 percent in June and up from 5. 1 percent when COVID-19 first struck Australian shores. The central bank board discussed several other scenarios for the outlook, which will be detailed in the policy statement. Dr. Lowe said a stronger recovery was possible if progress was made in containing the virus shortly. But on the flip side, if Australia and other countries were to experience further widespread lockdowns, the recovery in both output and the labor market would be delayed. Reserve Bank assistant governor for economics Luci Ellis will also deliver a webinar address to Australian Business Economists shortly after the policy statement is released on Friday.