SYDNEY (Reuters) – Australia’s central bank pumped liquidity into the banking system on Thursday ahead of expected further intervention later in the day, as national airline Qantas stood down two-thirds of its employees because of the coronavirus epidemic.
The Reserve Bank of Australia (RBA) is widely expected to announce an out-of-cycle rate cut, taking the benchmark to a record low of 0.25%, and launch its first ever quantitative easing programme as it seeks to prop up the domestic economy.
Australia has recorded around 600 coronavirus infections and six deaths, a relatively small number compared to other countries, but officials are growing increasingly concerned about the prospect of an exponential rise in cases.
Australian Prime Minister Scott Morrison on Wednesday declared a “human biosecurity emergency”, effectively banning all international travel, limiting indoor gatherings to 100 people and restricting entry to aged care facilities.
“We can’t stop the virus but we can manage the pace that it spreads,” Morrison told Nova FM on Thursday.
The widening restrictions on travel and domestic movement are expected to help push the economy into its first recession in nearly three decades in the first half of 2020.
Qantas Airways Ltd on Thursday put 20,000 employees on leave until at least the end of May as it suspended all international flights and slashed domestic services by almost two-thirds after several countries closed their borders.
The RBA has been pumping money into the system throughout the week to ensure business and households have access to credit as the coronavirus causes chaos in global financial markets.
With little headroom left on interest rate moves, the bank is expected to turn to quantitative easing.
“All other major central banks elsewhere have stepped up but the RBA has made us wait until today,” Su-Lin Ong, managing director at RBC Capital Markets in Sydney said. “The sheer uncertainty means nobody is doing anything unless they have to.”
The government is considering extending a A$17.6 billion (8.52 billion pounds) stimulus package.
Despite the measures so far, the Australian dollar has slumped more than 20% since the start of this year. Australian shares have plunged more than 27% over the same period, the worst performance since the 2008 global financial crisis when the stock market lost 41% of its value.
Qantas said it is in talks with grocer Woolworths Group Ltd about redeploying some of its workers as supermarkets struggle to contend with an influx of shoppers. People have been rushing to purchase goods ahead of any broader domestic shutdown, which has so far been resisted by Morrison.
Supermarket shelves are stripped daily of essentials, including milk, pasta, meat and toilet paper, perpetuating panic buying that Morrison has labelled “ridiculous and un-Australian.”
Economists, however, said any Qantas to Woolworths migration will do little to offset an expected rapid rise in unemployment.
Westpac chief economist Bill Evans has forecast the jobless rate to reach 7% by October, up from 5.3% last month.
The small island state of Tasmania on Thursday imposed its own state of emergency, becoming the first region within Australia’s borders to do so, ordering people who arrive from mainland Australia to self-isolate for 14 days.
Neighbouring New Zealand, which has reported 28 infections and no deaths, on Thursday followed Australia’s lead and told its citizens not to travel internationally.
Small Pacific islands, meanwhile, have reported eight confirmed cases of the virus: French Polynesia, Guam, Fiji and New Caledonia. Most of the island nations, however, do not have the ability to screen for the virus, raising concerns its spread in the region is being masked.
(Reporting by Byron Kaye, Jonathan Barrett, Renju Jose and Colin Packham in SYDNEY; Editing by Jane Wardell)