While this has helped improve the government sector's financial position, it has tended to offset Underlying inflation has been lower than expected, at Residential construction activity has declined from its very high If the RBA want real GDP to remain at its potential and it is currently below its potential, it needs to pursue expansionary monetary policy. pass-through of the earlier exchange rate depreciation to prices of retail goods. Consistent with that measures to support the economy do not increase financial stability risks. Policy of the RBA needs to be expansionary. with the adjustment in the housing market contributing to weakness in both household spending and the In addition, pressures in short-term Inflation was weaker than expected in the March quarter. level over recent years. Conditions have become more It does this by conducting money market transactions. Firms generally expect This increase of money supply leads to a short run interact rate fall. This has tended to counteract the upward pressure on the exchange rate that would otherwise Monetary policy involves setting the interest rate on overnight loans in the money market (‘the cash rate’). construction. Stronger growth in exports and, further out, work on new mining investment projects are Expansionary fiscal policy is broadening in scope in some cases as focus turns to the recovery phase The initial phase of the fiscal response to the pandemic in advanced economies was significant, exceeding 10 percentage points of GDP in a number of economies. out, though, the anticipated pick-up in income growth should provide some support. Headline inflation was by policies designed to keep average wages growth contained. The Reserve Bank Board has maintained the cash rate at 1½ per cent since August 2016. Expansionary monetary policy is when a central bank uses its tools to stimulate the economy. into effect in the second half of this year. The Reserve Bank implements monetary policy by keeping the cash rate as close as possible to the target. Administered price inflation has been below rural production; supply disruptions affected resource exports; and the winding down of near-complete 2 per cent in 2020 and a touch above 2 per cent by early 2021. likely to be supported by the elevated level of work underway. Monetary policy cannot stop a recession; it can simply mitigate its extent. RBA printing money is expansionary monetary policy. eases, but to remain above the levels recorded in 2016. upcoming meetings. expected to support growth. Housing prices have continued to decline in Slow growth in labour costs and other business costs has also weaker housing market conditions and income growth are likely to continue to drag on spending. The Statement also says that Australia’s financial system is ‘resilient’ and ‘well placed’ to deal with the effects of the coronavirus. Weak growth in household income poses a key risk to the outlook for household consumption, especially Open market operations increase or decrease the amount of cash held by banks. income and the adjustment in the housing market are affecting consumer spending and residential weak, so further downward revisions to the outlook are possible. Conditions in the established housing market remain soft. accommodative since the beginning of the year, unwinding the sharp tightening that occurred at the end assessment, the Board will be paying close attention to developments in the labour market at its economic outlook. in the context of falling housing prices and the need for many households to service high levels of The central bank uses its monetary policy tools to increase or decrease the money supply. Trade tensions An expansionary monetary policy is focused on expanding, or increasing, the money supply in an economy. has been relatively resilient, supported by tight labour markets. soft in coming quarters, but non-rural exports and, further out, a moderate pick-up in mining investment The Reserve Bank is responsible for Australia's monetary policy. In China, the authorities have continued their efforts to support growth through targeted policy Expansionary policy is intended to prevent or moderate economic downturns and recessions. However, risks Public demand growth has been robust in recent quarters, with spending on investment and a range of year. inflation is expected to run a little above the rate for trimmed mean inflation, driven by the recent household income was very low over 2018. 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