“It is too early to determine how long-lasting the impact will be,” he said in a statement.
The RBA is expecting the Australian economy to grow 2.75 per cent this year and 3 per cent in 2021.
“In the short term, the bushfires and the coronavirus outbreak will temporarily weigh on domestic growth,” he said, adding the bank was prepared to cut rates if necessary to help economic growth, inflation and employment.
The RBA will release new economic growth forecasts by the end of the week following the release of retail trade data and Dr Lowe is due to speak at the National Press Club on Wednesday, which will give a clearer picture of the bank’s expectations for the economy.
CoreLogic head of research Tim Lawless said the decision to remain on hold for February had been widely expected given uncertainty about the impact of this summer’s bushfires and the “unfolding implications” of the coronavirus outbreak.
“The RBA may need to keep some rate cutting ammunition up their sleeve should these scenarios play out more severely than expected,” Mr Lawless said.
“To date, lower interest rates haven’t flowed through to a material improvement in economic conditions but housing markets have well and truly responded, with national housing values rising 6.7 per cent since the first rate cut in June through to the end of January,” he said.
Dwelling approvals increased for the first time since mid-2018 in December and mortgage commitments were up in the year to November, which Mr Lawless said could be “some early signs” the housing market price boost was starting to help other industries.
“Although rates remained on hold today, we are expecting the RBA to cut the cash rate later in 2020,” he said. “Further rate cuts could fuel home buyer demand, although we don’t expect future cuts to the cash rate to be passed on in full to mortgage rates.”
The Sydney Morning Herald and The Age 2020 Scope survey of 21 economists on average tipped rates to fall below 0.5 per cent by June before rising slightly by the end of the year. The panellists expect these cuts could cause home prices to rise in the major Melbourne and Sydney property markets.
ANZ head of Australian economics David Plank said there was “some comfort” for the outlook after the ANZ-Roy Morgan Australian Consumer Confidence index released on Tuesday morning recorded a slight recovery in confidence last week, though it is still far below historical averages.
“The decisive policy action [on coronavirus] taken by the government to protect the health and wellbeing of Australian citizens may be seen as a positive development that provides at least some offset to community concerns about the health and economic consequences of the virus,” Mr Plank said.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.