What policy response is expected from Australian regulators?

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Expected Policy Response from Australian Regulators to Coronavirus Impact

Australian financial regulators convened an emergency meeting on Monday to address the economic repercussions of the coronavirus outbreak. Economists anticipate a significant policy reaction, with the Reserve Bank of Australia (RBA) widely expected to implement an interest rate cut at its Tuesday review. Financial futures markets are almost fully factoring in a 25-basis-point reduction in the cash rate, bringing it down to 0.5 per cent from its current level of 0.75 per cent.
Anticipated Interest Rate Cut

The consensus among economists from institutions such as National Australia Bank, Westpac, AMP, UBS, and Goldman Sachs is that the RBA will lower its benchmark cash rate by 25 basis points during its meeting that commenced on Tuesday. This move would bring the rate to an all-time low of 0.5 per cent, reflecting a shift in expectations from the previous week when the market implied only a one-in-five chance of such a reduction.
Potential for More Aggressive Action

Some economists, including NAB chief economist Alan Oster, have raised the possibility of a more substantial 50-basis-point cut. Oster also suggested that the RBA should communicate its readiness to deploy additional measures, such as supporting liquidity and credit markets, should signs of financial system stress emerge due to the unfolding growth shock.
Alternative Timing and Government Stimulus

While an immediate rate cut is widely anticipated, there is a divergence of opinion regarding the exact timing. Some analysts, like Commonwealth Bank of Australia economist Gareth Aird, foresee the RBA potentially holding off until April. This scenario might coincide with the government unveiling a stimulus package, with Prime Minister Scott Morrison having previously indicated plans for a "targeted, modest and scalable" measure to bolster economic growth.

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