SYDNEY, Nov 24 (Reuters) – The Reserve Bank of Australia’s (RBA) latest policy easing has succeeded in holding down the local currency, a top central banker said on Tuesday, while also cautioning against removing stimulus too soon.
Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said cuts in official interest rates and the purchase of government bonds had lowered borrowing costs across the economy and boosted incomes for most households.
Historically low rates also made it easier for government to fund its massive fiscal stimulus, said Debelle, adding that the level of debt was “absolutely sustainable”.
Debelle said the RBA’s decision to buy A$100 billion ($72.98 billion) of longer-dated bonds over six months was needed because Australian 10-year yields had been above those in peer nations, putting unwelcome upward pressure on the Aussie dollar.
“This package has materially lowered the structure of interest rates in the Australian financial system,” he said in a speech to Australian business economists.
“The decline in interest rates across the yield curve has lowered the exchange rate, relative to what it otherwise would be.”
Debelle held out hope that positive news about potential vaccines for coronavirus would help bolster confidence in the economy, though he noted it would take some time for such vaccines to be widely available and distributed.
With any recovery likely to be bumpy, he argued it was best to be “careful of removing the stimulus too early.”
($1 = 1.3702 Australian dollars)
(Reporting by Wayne Cole; Editing by Kim Coghill)
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