RBA governor expected to be more upbeat

Reserve Bank governor Philip Lowe is expected to deliver a significantly better outlook on the economy than past assessments when he fronts a parliamentary inquiry into the response to the pandemic on Thursday.

In what will be the governor's first public appearance since Treasury recalibrated the cost of the $130 billion JobKeeper program by $60 billion, Dr Lowe is expected to be tested on the central bank's own forecasts and whether they have been too pessimistic.

A critical issue for us here in Australia is restoring people's confidence.
— Philip Lowe, Reserve Bank governor

Dr Lowe has already been talking up the economy and mentioned the word "confidence" in his last public appearance no less than seven times.

"A critical issue for us here in Australia is restoring people's confidence" Dr Lowe said.

There has been a clear bounce in retail sales and personal spending, and Commonwealth Bank and ANZ credit and debit card data points to the first positive year-on-year growth since the COVID-19 crisis.

As restrictions around the states ease, more businesses are expected to reopen and rehire. Online restaurant-reservation service company OpenTable shows that restaurant bookings are now down about 90 per cent year on year instead of the 100 per cent they were down during April.

Job losses slow

While the rate of job losses has already started to slow, what the reopening of business means for rehiring will be closely watched.

Job matching site SEEK shows job ads up 39.7 per cent for the fortnight ended May 24 compared to the average for April.

Whether businesses such as restaurants have survived will also depend on banks support on credit.

"Banks have reduced their lending rates to record lows, with interest rates for small business declining the most. The early evidence is that these measures are working as expected," Dr Lowe said.

While exports and imports were down in April, the RBA governor also said a rebound in trading partners' economies was not essential for our own recovery.

"I don't think that's the main thing holding back the local recovery. It's really kind of restoring confidence – that's what we really need."