RBA’s Dr Phil always sees the sunny side of pandemic life

RBA governor Philip Lowe is confident the economy will rebound by October. Picture: NCA Newswire /Gaye Gerard

The more things change, the more Philip Lowe’s optimism stays the same.

Dr Phil is probably the only doctor in Australia to see the sunny side of the pandemic. Not that Lowe is playing down the dangers of the Delta strain, but he’s trying to join the dots to a brighter future as long as those dots are hefty fiscal support, high rates of Covid-19 vaccination and animal spirits.

The Chief Interest Rate Officer’s six-monthly appearance before a parliamentary committee on Friday was a mid-game pump-up for a nation under rising stay-at-home duress.

Lowe was here to tell a “positive story” of Canberra and the central bank working together to throw everything they could muster at Covid-19’s economic disruptions.

“Households and businesses also showed remarkable resilience and an ability to change how they do things,” he said of the incipient renewal.

“As we assess the impact of the lockdowns on the economy, it is important not to lose sight of the fact that not all of Australia is affected. Significant parts of the Australian economy are still on the positive trajectory that was in place before the recent outbreaks.”

As is the way with these outings, the RBA also published its quarterly Statement on Monetary Policy, whose take-out message according to Lowe “is the economy is expected to bounce back quickly once the restrictions ease”.

That snapback is based largely on past pandemic performance, so a conga line of private sector economists trotted out on Friday with their sales teams’ disclaimer mantras.

The Commonwealth Bank’s head of Australian economics, Gareth Aird, said the RBA’s scenario for the economy over the near term, with an implied 1 per cent contraction in GDP this quarter, followed by a 2.4 per cent rise in December, “looks incredibly rosy”.

“We think that the RBA is significantly underestimating the impact that Covid-19 will have on the economy until the vaccine has been rolled out sufficiently for lockdowns to be a thing of the past,” Aird said.

Lowe has confidence in the coming fiscal response. Should further outbreaks occur, and lockdowns continue, the Morrison government will not skimp on disaster payments, which the RBA is facilitating.

For many, the reworked “JobKeeper” is better than the original because this version is “non-taxable”, according to Scott Morrison in a radio interview last week, a pleasant surprise for all concerned.

Previous disaster relief and JobKeeper payments were deemed taxable by the ATO so an expensive precedent has been set for future income support.

Daniel Andrews was wrong when he said the $750 amount was the same as JobKeeper; it’s better, and employers are worried it will stop some coming to work, even for a few hours.

With a federal election due in May, the Prime Minister won’t leave anything to chance to get the economy back on its fast legs, including the rollout.

The fiscal restraint came off last year, which gives Dr Phil breathing space on monetary policy and puts a rose in his cheek.