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Nov. 23, 2020, 10:56 p.m. EST

RBA expects uneven recovery despite COVID vaccine

By James Glynn

SYDNEY--The Reserve Bank of Australia expects the likely global release of a Covid-19 vaccine in the coming months to boost confidence and investment across the economy, although recovery will be uneven and monetary and fiscal stimulus will need to remain in place for some time.

"While the news about vaccines should help bolster business confidence, the recovery will be uneven," RBA Deputy Governor Guy Debelle said in a speech to business economists Tuesday.

"It is likely to be some time before the vaccines will be widely available and distributed. That said, the fiscal and monetary support will boost spending in the economy," he added.

The comments come as global share prices jump on more reports around the likely provision of an effective vaccine against the coronavirus next year.

Mr. Debelle said the RBA is confident that the raft of conventional and unconventional monetary policy measures announced this year to meet the challenges posed by the Covid-19 pandemic are lending support to the economy on a number of fronts.

"This package has materially lowered the structure of interest rates in the Australian financial system. It has lowered borrowing costs for households, businesses and the government," he said.

The decline in interest rates across the yield curve has lowered the exchange rate relative to what it otherwise would be, Mr. Debelle added.

The central bank deployed an aggressive quantitative easing program at the start of this month, and lowered its official cash rate to 0.10% from 0.25%, bringing it in step with many of its global peers. The RBA also maintains a 0.10% target for three-year government bond yields and has said it expects to keep monetary policy at emergency settings for at least three years.

Mr. Debelle said the policy measures announced by the RBA complement a significant fiscal stimulus unveiled by Canberra in 2020, which looks set to remain in place until unemployment has fallen back to levels seen prior to the pandemic.

The Australian federal government's budget deficit in 2020-2021 is expected to be 11% of GDP, having been near balance at the beginning of this year. State governments have also provided stimulus, with their combined budget deficits around 4% of GDP.

The fall in interest rates is also supporting spending in the economy, Mr. Debelle added.

"The lower borrowing rates will encourage businesses and households to borrow, invest and spend when they are confident about their future prospects," he said.

Write to James Glynn at James.Glynn@WSJ.com

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