RBA’s Speech: Kitchen Sink Included!

Phil Lowe gave an important speech yesterday outlining their monetary policy response. “At some point, the virus will be contained and our economy and our financial markets will recover”. We are going to hear a lot more about bridges and cushions.

The Reserve Bank Board met yesterday and decided on a comprehensive package to help support jobs, incomes and businesses as the Australian economy deals with the coronavirus. I would like to use this opportunity to explain this package and to answer your questions.

We are clearly living in extraordinary and challenging times. The coronavirus is first and foremost a very major public health problem. But it has also become a major economic problem, which is having deep ramifications for financial systems around the world. The closure of borders and social distancing measures are affecting us all and they are changing the way we live. Understandably, our communities and our financial markets are both having trouble dealing with a rapidly unfolding situation that they have not seen before.

As our country manages this difficult situation, it is important that we do not lose sight of the fact that we will come through this.

At some point, the virus will be contained and our economy and our financial markets will recover.

Undeniably, what we are facing today is a very serious situation, but it is something that is temporary. As we deal with it as best we can, we also need to look to the other side when things will recover. When we do get to that other side, all those fundamentals that have made Australia such a successful and prosperous country will still be there. We need to remember that.

To help us get to the other side, though, we need a bridge. Without that bridge, there will be more damage, some of which will be permanent, to the economy and to people’s lives.

Building that bridge requires a concerted team effort, with us all pulling together in the country’s interest. On the economic front, there is very close policy coordination between the Australian Government, the Australian Treasury, the Reserve Bank and Australia’s financial regulators. We are all in close contact with one another and are working constructively together and we will continue to do so. This coordination is evident in the various policy statements today.

Governments across Australia are playing their important role in building that bridge to the recovery, with the various fiscal initiatives from the Australian and state governments providing very welcome support. Rightly, the focus is on supporting businesses and households who will suffer a major hit to their incomes. It is increasingly clear that further help will be required on this front and the Australian Government has indicated that additional policy measures will be announced shortly. Australian public finances are in good shape and the country’s history of prudent fiscal management gives us the capacity to respond now.

The banks too have an important role to play in building that bridge to the recovery by supporting their customers. Without this support, it will be harder for us all to get to the other side in reasonable shape.

Australia has a strong financial system, which is well placed to provide the needed support to businesses and households. The system has strong capital and liquidity positions and our financial institutions have invested heavily in resilience. As APRA confirmed this afternoon in a public statement, the current large buffers of capital and liquidity are able to be used to support ongoing lending to the economy.

The financial regulators have also confirmed that they are examining how the timing of various regulatory initiatives might be adjusted to allow financial institutions to concentrate on their businesses and work with their customers. APRA and ASIC both stand ready to assist institutions work through regulatory issues arising from the virus. The Council of Financial Regulators is meeting again tomorrow and will also meet with the largest lenders to discuss how they can support their customers and whether there are any regulatory impediments in the way.

The Reserve Bank itself is also playing a role in building that bridge to the recovery. I will now turn to that.

Our major focus is to support jobs, incomes and businesses, so that when the health crisis recedes the country is well placed to recover strongly. Supporting small business over coming months is a particular priority.

Prior to today’s announcement, we had already taken several steps over recent days to support the Australian economy.

Over the past week or so we have been injecting substantial extra liquidity into the financial system through our daily market operations. As part of this effort, we will be conducting one-month and three-month repo operations each day. We will also conduct repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant. As a result of these liquidity operations, Exchange Settlement balances have increased from around $2.5 billion a month ago to over $20 billion today.

The Reserve Bank also stands ready to purchase Australian government bonds in the secondary market to support its smooth functioning. The government bond market is a key market for the Australian financial system, because government bonds provide the pricing benchmark for many financial assets. Our approach here is similar in concept to our longstanding approach to the foreign exchange market, where we have been prepared to support smooth market functioning when liquidity conditions are highly stressed. We now stand ready to do the same in the bond market and we are working in close cooperation on this with the Australian Office of Financial Management (AOFM).

In addition to these previously announced measures, today’s package has four elements. They are: a reduction in the cash rate to 0.25 per cent; a target of 0.25 per cent for the yield on 3-year government bonds; a term funding facility to support credit to businesses, particularly small and medium-sized businesses; and an adjustment to the interest rate on accounts that financial institutions hold at the RBA.

I will discuss each of these in turn.

1. A Further Reduction in the Cash Rate to ¼ Per Cent

This brings the cumulative decline over the past year to 1¼ percentage points. This is a substantial easing of monetary policy, which is boosting the cash flow of businesses and the household sector as a whole. It is also helping our trade-exposed industries through the exchange rate channel. At the same time, though, low interest rates do have negative consequences for some people, especially those relying on interest income. The Reserve Bank Board has discussed these consequences extensively, but the evidence is that lower interest rates do benefit the community as a whole, although I acknowledge that the effects are uneven.

With this decision today, the policy rates set by the Reserve Bank of Australia, the United States Federal Reserve, the Bank of England and the Reserve Bank of New Zealand are all effectively at ¼ per cent. Each of us are using all the scope we have with interest rates to support our economies through a very challenging period.

At its meeting yesterday, the Board also agreed that we would not increase the cash rate from its current level until progress was made towards full employment and that we were confident that inflation will be sustainably within the 2–3 per cent range. This means that we are likely to be at this level of interest rates for an extended period.

Before the coronavirus hit, we were expecting to make progress towards full employment and the inflation target, although that progress was expected to be only very gradual. Recent events have obviously changed the situation and we are now likely to remain short of those objectives for somewhat longer.

I am not able to provide you with an updated set of economic forecasts. The situation is just too fluid. But we are expecting a major hit to economic activity and incomes in Australia that will last for a number of months. We are also expecting significant job losses. The scale of these losses will depend on the ability of businesses to keep workers on during this difficult period. We saw during the global financial crisis how flexibility in working arrangements limited job losses and this benefited the entire community. I hope the same is true in the months ahead.

It is also important to repeat that we are expecting a recovery once the virus is contained. The timing and strength of that recovery will depend in part upon how successful we are, as a nation, in building that bridge to the other side. When that recovery does come, it will be supported by the low level of interest rates. We will maintain the current setting of interest rates until a strong recovery is in place and the achievement of our objectives is clearly in sight.

2. A Target Yield on 3-year Australian Government Bonds

Over recent decades, the Reserve Bank’s practice has been to target the cash rate, which forms the anchor point for the risk-free term structure. We are now extending and complementing this by also targeting a risk-free interest rate further out along the yield curve.

In particular, we are targeting the yield on 3-year Australian Government Securities (AGS) and we have set this target at around 0.25 per cent, the same as the cash rate. Over recent weeks, the yield on 3-year AGS has averaged 0.45 per cent, so this represents a material reduction.

We have chosen the three-year horizon as it influences funding rates across much of the Australian economy and is an important rate in financial markets. It is also consistent with the Board’s expectation that the cash rate will remain at its current level for some years, but not forever.

To achieve this yield target, we will be conducting regular auctions in the bond market. We published some technical details earlier today and we will keep the market informed of our operations. Our first auction will be tomorrow. As part of this program, our intention is to purchase bonds of different maturities given the high level of substitutability between bonds. We are also prepared to buy semi-government securities to achieve the target and to help facilitate the smooth functioning of Australia’s bond market.

I want to make it clear that our purchases will be in the secondary market and we will not be purchasing bonds directly from the Government.

I would also like to emphasise that we are not seeking to have the three-year yield identically at 25 basis points each and every day. There will be some natural variation, and it does not make sense to counter that. It may also take some time for yields to fall from their current level to 25 basis points.

I understand why many people will view this as quantitative easing – or QE. This is because there is a quantitative aspect to what we are doing – achieving this target will involve the Reserve Bank buying bonds and an expansion of our balance sheet.

But our emphasis is not on the quantities – we are not setting objectives for the quantity and timing of bonds that we will buy, as some other central banks have done. How much we need to purchase, and when we need to enter the market, will depend upon market conditions and prices.

Rather than quantities or the size of our balance sheet, our focus is very much on the price of money and credit. Our objective here is to provide support for low funding costs across the entire economy. By lowering this important benchmark interest rate, we will add to the downward pressure on borrowing costs for financial institutions, households and businesses. We are prepared to transact in whatever quantities are necessary to achieve this objective.

We expect to maintain the target for three-year yields until progress is being made towards our goals of full employment and the inflation target. Our expectation, though, is that the yield target will be removed before the cash rate is increased.

3. A Term Funding Facility for the Banking System with Support for Business Credit, Especially to Small and Medium-sized Businesses

The scheme has two broad objectives.

The first is to lower funding costs for the entire banking system so that the cost of credit to households and businesses is low. In this regard, it will complement the target for the three-year yield on AGS.

The second objective is to provide an incentive for lenders to support credit to businesses, especially small and medium-sized businesses. This is a priority area for us. Many small businesses are going to find the coming months very difficult as their sales dry up and they support their staff. Assisting small businesses through this period will help us make that bridge to the other side when the recovery takes place. If Australia has lost lots of otherwise viable businesses through this period, making that recovery will be harder and we will all pay the price for that. So it is important that we address this.

Under this new facility, authorised deposit-taking institutions (ADIs) in total will have access to at least $90 billion in funding. ADIs will be able to borrow from the Reserve Bank an amount equivalent to 3 per cent of their existing outstanding credit to Australian businesses and households. ADIs will be able to draw on these funds up until the end of September this year.

Lenders will also be able to borrow additional funds from the Reserve Bank if they increase credit to business this year. For every extra dollar lent to large business, lenders will have access to an additional dollar of funding from the Reserve Bank. For every extra dollar of loans to small and medium-sized businesses they will have access to an additional five dollars. These funds can be drawn upon up until the end of March next year. There is no extra borrowing allowance for additional housing loans.

The funding from the Reserve Bank will be for three years at a fixed interest rate of 0.25 per cent, which is substantially below lenders’ current funding costs. Institutions accessing this scheme will need to provide the usual collateral to the Reserve Bank, with haircuts applying. The first drawings under this facility will be possible no later than four weeks from today.

This scheme is similar to that introduced by the Bank of England. Unlike the Bank of England’s scheme, though, the interest rate is fixed for the term of the funding. This is consistent with our view that the cash rate is likely to stay at its current level for some time. Another difference with the Bank of England’s scheme is that we have not included a higher interest rate if credit contracts. While a decline in credit would be undesirable, including a penalty may act as a disincentive for institutions to take part in the scheme.

We are encouraging all ADIs to use the term funding facility to help support their customers. I welcome APRA’s confirmation this afternoon that it also supports ADIs using this scheme. I also welcome the Australian Government’s announcement that it will support the markets for asset-backed securities through the AOFM. This support is important as it will help non-bank financial institutions and small lenders to continue to provide credit to Australian households and businesses.

4. An Adjustment to the Interest Rate on Exchange Settlement Balances

Under our longstanding framework, the RBA operates a corridor system around the cash rate. Under that system, the balances that banks hold with the RBA overnight in Exchange Settlement accounts earn an interest rate 25 basis points below the cash rate. And on the other side of the corridor, in the event that a bank needed to borrow from the RBA overnight, it would be charged 25 basis points above the cash rate.

Under this arrangement and with the cash rate now at 25 basis points, the interest rate on Exchange Settlement balances would have been zero. We have decided to increase this to 10 basis points. We are not making any change to the arrangements for the top of the corridor.

This adjustment to the corridor reflects the fact that there will be a significant increase in the balances held in Exchange Settlement accounts due to the combined effect of the Bank’s enhanced liquidity operations, bond purchases and term funding program. Maintaining a zero interest rate on these balances would increase the costs to the banking system. In the current environment, this would be unhelpful.

The increase in settlement balances is also expected to change the way that the cash market operates. In other countries, where there have been large increases in balances at the central bank, the cash rate equivalent has drifted below the target and transaction volumes in the cash market have declined. It is likely that we will see the same outcome in Australia. The Reserve Bank will continue to monitor the cash market closely and is prepared to adjust arrangements if the situation requires.

So these are the four measures announced earlier this afternoon. Together, they represent a comprehensive package to lower funding costs in Australia and support the supply of credit. Complementary initiatives by APRA and the AOFM are also working towards those same objectives.

The term funding scheme and the three-year yield target are both significant policy developments that would not have been under consideration in normal times. They both carry financial and other risks for the Reserve Bank and they both represent significant interventions by the Bank in Australia’s financial markets.

The Reserve Bank Board did not take these decisions lightly. But in the context of extraordinary times and consistent with our broad mandate to promote the economic welfare of the people of Australia, we are seeking to play our full role in building that bridge to the time when the recovery takes place. By doing all that we can to lower funding costs in Australia and support the supply of credit to business, we will help our economy and financial system get through this difficult period.

Bank Of England Cuts To 0.1%; QE’s by £200 Billion More

The spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary. The role of the Bank of England is to help to meet the needs of UK businesses and households in dealing with the associated economic disruption.

On 11 March, the Bank of England’s three policy committees announced a package of measures to support UK businesses and households through this period.  In his Budget on the same day, the Chancellor of the Exchequer announced a number of fiscal measures with the same aim.  On 17 March, this combined package of measures was complemented by the announcement by HM Treasury of the Covid 19 Corporate Financing Facility (CCFF), for which the Bank will act as HM Treasury’s agent.  By purchasing commercial paper, the CCFF will provide funding to non-financial businesses making a material contribution to the UK economy to support them in paying salaries, rents and suppliers while experiencing the likely disruption to cashflows associated with Covid-19.

In light of actions to tackle the spread of the virus, and evidence relating to the global and domestic economy and financial markets, the Monetary Policy Committee (MPC) held an additional special meeting on 19 March.  Over recent days, and in common with a number of other advanced economy bond markets, conditions in the UK gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves.  As a consequence, UK and global financial conditions have tightened.   

At its special meeting on 19 March, the MPC judged that a further package of measures was warranted to meet its statutory objectives.  It therefore voted unanimously to increase the Bank of England’s holdings of UK government bonds and sterling non-financial investment-grade corporate bonds by £200 billion to a total of £645 billion, financed by the issuance of central bank reserves, and to reduce Bank Rate by 15 basis points to 0.1%.  The Committee also voted unanimously that the Bank of England should enlarge the TFSME scheme, financed by the issuance of central bank reserves.  

The majority of additional asset purchases will comprise UK government bonds.  The purchases announced today will be completed as soon as is operationally possible, consistent with improved market functioning.  The Bank will issue further guidance to the market in due course.  

The next regularly scheduled MPC meeting will end on 25 March, with the minutes published on 26 March.  The minutes of today’s special meeting will be released at the same time. 

Small Lenders To Be Supported

The Treasurer has announced a second stimulus plan as Australia fights to contain the economic impact of the coronavirus.

Hours after the emergency rate cut by the Reserve Bank, the Prime Minister and Treasurer addressed Australia announcing a further $15 billion investment to enable smaller lenders to continue supporting Australian consumers and small businesses.  

This funding will complement the Reserve Bank of Australia’s (RBA’s) announcement of a $90 billion term funding facility for authorised deposit-taking institutions (ADIs) that is also expected to support lending to small and medium enterprises. 

The government’s latest action is aimed to enable customers of smaller lenders to continue to access affordable credit as the world deals with the significant challenges presented by the spread of coronavirus.

“Small lenders are critical to Australia’s lending markets, often driving innovation and providing competition for larger lenders,” said the Treasurer Josh Frydenberg.  

“Combined, these measures will support the continued ability of lenders to support their customers and in doing so the Australian economy,” the Treasurer added. 

The Treasurer confirmed that the Australian Office of Financial Management (AOFM) will be provided with an investment capacity of $15 billion to invest in wholesale funding markets used by small ADIs and non-ADI lenders.

The $15 billion capacity would allow the AOFM to support a substantial volume of expected issuance by these lenders over a 12 month period.

“Importantly the assets being purchased by the AOFM will not be limited to residential mortgage backed securities. 

“The AOFM will also be able to invest in a range of other asset backed securities and warehouse facilities. The Government will provide the AOFM with investment guidelines that will outline the basis on which the AOFM is to undertake these investments,” the Treasurer added. 

Enabling legislation will be introduced in the week commencing Monday, 23 March 2020.  The AOFM is expected to be able to begin investing by April.

Australia Shuts Borders

All non-citizen, non-resident travellers will be banned from entering Australia, as the government attempts to get a handle on the coronavirus outbreak.

“We believe it is essential to take a further step to ensure we are now no longer allowing anyone, unless they are a citizen or resident or direct family member,” Scott Morrison said in an address on Thursday afternoon.

The government’s reasoning is that a significant majority of cases are not contracting the virus through community transmission, but by contact with someone who has recently travelled from overseas.

“The reason for this decision is about 80 per cent of the cases we have in Australia are either the result of someone who has contracted the virus overseas or someone who has had a direct contact with someone who has returned from overseas,” he said.

Earlier this week, the government announced all Australians currently overseas should return home immediately, using commercial flights

APRA Drops Capital Requirements

The Australian Prudential Regulation Authority (APRA) today announced temporary changes to its expectations regarding bank capital ratios, to ensure banks are well positioned to continue to provide credit to the economy in the current challenging environment.

Over the past decade, the Australian banking system has built up substantial capital buffers. The highest quality form of capital, Common Equity Tier 1 (CET1) capital, reached $235 billion at the end of 2019. As a result, banks are typically maintaining capital levels well above minimum regulatory requirements.

In 2017, APRA set benchmark capital targets for banks to enable them to be regarded internationally as unquestionably strong (which was a recommendation of the 2014 Financial System Inquiry). These benchmarks are well above current minimum regulatory requirements. For the four major banks, for example, this benchmark equated to having a CET1 ratio of at least 10.5 per cent of risk-weighted assets. A lower benchmark applies for smaller banks. In comparison, the actual CET1 ratio of the banking system by the end of 2019 had reached 11.3 per cent.

APRA is advising all banks today that, given the prevailing circumstances, it envisages they may need to utilise some of their current large buffers to facilitate ongoing lending to the economy. This is especially the case for banks wishing to take advantage of new facilities announced today by the Reserve Bank of Australia to promote the continued flow of credit. Provided banks are able to demonstrate they can continue to meet their various minimum capital requirements, APRA would not be concerned if they were not meeting the additional benchmarks announced in 2016 during the period of disruption caused by COVID-19.

APRA Chair Wayne Byres said: “APRA has been pursuing a program to build up the financial strength of the system for many years, when banks had the capacity to do so. As a result, the Australian banking system is well-capitalised by both historical and international standards.

“APRA’s objective in building up this capital strength has been to ensure it is available to be drawn upon if needed in times such as this. Today’s announcement reflects the underlying strength of the system: even if the banking system utilises some of its current large buffers, it will still be operating comfortably above minimum regulatory requirements,” Mr Byres said.

RBA Cuts And More

RBA said: The coronavirus is first and foremost a public health issue, but it is also having a very major impact on the economy and the financial system. As the virus has spread, countries have restricted the movement of people across borders and have implemented social distancing measures, including restricting movements within countries and within cities. The result has been major disruptions to economic activity across the world. This is likely to remain the case for some time yet as efforts continue to contain the virus.

Financial market volatility has been very high. Equity prices have experienced large declines. Government bond yields have declined to historic lows. However, the functioning of major government bond markets has been impaired, which has disrupted other markets given their important role as a financial benchmark. Funding markets are open to only the highest quality borrowers.

The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus.

At some point, the virus will be contained and the Australian economy will recover. In the interim, a priority for the Reserve Bank is to support jobs, incomes and businesses, so that when the health crisis recedes, the country is well placed to recover strongly.

At a meeting yesterday, the Reserve Bank Board agreed to the following comprehensive package to support the Australian economy through this challenging period:

  1. A reduction in the cash rate target to 0.25 per cent. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.
  2. A target for the yield on 3-year Australian Government bonds of around 0.25 per cent. This will be achieved through purchases of Government bonds in the secondary market. Purchases of Government bonds and semi-government securities across the yield curve will be conducted to help achieve this target as well as to address market dislocations. These purchases will commence tomorrow. The Bank will work closely with the Australian Office of Financial Management (AOFM) and state government borrowing authorities to ensure the efficacy of its actions. Further details about the implementation of this are provided in the accompanying notice.
  3. A term funding facility for the banking system, with particular support for credit to small and medium-sized businesses. The Reserve Bank will provide a three-year funding facility to authorised deposit-taking institutions (ADIs) at a fixed rate of 0.25 per cent. ADIs will be able to obtain initial funding of up to 3 per cent of their existing outstanding credit. They will have access to additional funding if they increase lending to business, especially to small and medium-sized businesses. This facility is for at least $90 billion. Further details are available in the accompanying notice. The Australian Government has also developed a complementary program of support for the non-bank financial sector, small lenders and the securitisation market, which will be implemented by the AOFM.
  4. Exchange settlement balances at the Reserve Bank will be remunerated at 10 basis points, rather than zero as would have been the case under the previous arrangements. This will mitigate the cost to the banking system associated with the large increase in banks’ settlement balances at the Reserve Bank that will occur following these policy actions.

The Reserve Bank will also continue to provide liquidity to Australian financial markets by conducting one-month and three-month repo operations in its daily market operations until further notice. In addition, the Bank will conduct longer-term repo operations of six-month maturity or longer at least weekly, as long as market conditions warrant.

The various elements of this package reinforce one another and will help to lower funding costs across the economy and support the provision of credit, especially to small and medium-sized businesses.

Australia’s financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy. The Reserve Bank is working closely with the other financial regulators and the Australian Government to help ensure that Australia’s financial markets continue to operate effectively and that credit is available to households and businesses.

Today’s policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia. Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.

RBNZ Says Cash and other payments systems ready for COVID-19

The Reserve Bank and the banking system have plenty of cash on hand to meet demand under any circumstances,” says Assistant Governor Christian Hawkesby. Mr Hawkesby made the statement today after public interest and discussion about cash availability and use.

“We work closely with New Zealand’s banks, the companies that transport cash, and those that supply cash-handling equipment. They are all prepared for operating during all circumstances, including any unusual challenges that COVID-19 may pose.” he says.

“As an example, the Reserve Bank has at least two years’ worth of replacement cash available to feed into the system if required. We can keep cash flowing to and from branches and ATMs in the event of staff shortages or other difficulties anywhere in the cash system.”

“The banks and electronic payments systems are prepared, resilient, and will keep operating. When people are shopping, there will be cash and other payments systems available to support that,” he says.

The Reserve Bank is also reminding shoppers and retailers to practice good hand hygiene.

“Cash is just one of a number of frequently touched surfaces we encounter. The same is true for any other payment device whether it’s a card, phone or watch. This reinforces the need for good hand hygiene regardless of the way you pay or accept payment.”

“Retailers should use common-sense when it comes to cash. Businesses are not obliged to accept cash, but declining it may end up disadvantaging people who rely on its use. These people are more likely to be young, elderly, poor, disabled or financially excluded. Have respect and care for each other,” says Mr Hawkesby.

An Irrelevant Employment Number

Australia’s trend unemployment rate remained steady at 5.1 per cent in February 2020, from a revised January 2020 figure, according to the latest information released by the Australian Bureau of Statistics (ABS) today.

ABS Chief Economist Bruce Hockman said: “The trend unemployment rate remained steady at 5.1 per cent for a third consecutive month.”

There was no notable impact on February 2020 Labour Force statistics resulting from the recent bushfires or COVID-19. The February reference period was in the first half of the month and pre-dates the notable increases in confirmed cases in Australia of COVID-19.

Employment and hours

In February 2020, trend monthly employment increased by around 21,000 people. Full-time employment increased by around 13,000 and part-time employment increased by around 8,000 people.

Over the past year, trend employment increased by around 241,000 people (1.9 per cent), below the average annual growth over the past 20 years (2.0 per cent).

Full-time employment growth (1.5 per cent) was below the average annual growth over the past 20 years (1.6 per cent) and part-time employment growth (2.7 per cent) was also below the average annual growth over the past 20 years (3.0 per cent).

The trend monthly hours worked decreased by less than 0.1 per cent in February 2020 and increased by 0.8 per cent over the past year. This was lower than the 20 year average annual growth of 1.6 per cent.

“We have seen a decrease in the trend hours worked in recent months, even though employment has continued to grow. This largely reflects a fall in the total hours worked by men”, added Mr Hockman.

Underemployment and underutilisation

The trend monthly underemployment rate remained steady at 8.6 per cent in February 2020, and increased by 0.3 percentage points over the past year.

The trend monthly underutilisation rate also remained steady at 13.7 per cent in February 2020, an increase of 0.4 percentage points over the past year.

States and territories trend unemployment rate

The monthly trend unemployment rate increased in Victoria and decreased in Queensland, South Australia and Tasmania in February 2020. The unemployment rate remained steady in all other states and territories.

Over the year, unemployment rates fell in Queensland, South Australia, Western Australia, Tasmania and the Australian Capital Territory. Unemployment rates increased in New South Wales, Victoria, and the Northern Territory.

Seasonally adjusted data

The seasonally adjusted unemployment rate decreased by 0.2 percentage points to 5.1 per cent in February 2020, while the underemployment rate remained steady at 8.6 per cent. The seasonally adjusted participation rate decreased by 0.1 percentage points to 66.0 per cent, and the number of people employed increased by around 27,000.

In original terms, the incoming rotation group in February 2020 had a higher employment to population ratio than the group it replaced (62.7% in February 2020, compared to 61.8% in January 2020), however it was lower than the sample as a whole (62.8%). The incoming rotation group had a higher full-time employment to population ratio than the group it replaced (43.6% in February 2020, compared to 43.4% in January 2020), and was higher than the sample as a whole (43.2%).

The incoming rotation group had a higher unemployment rate than the group it replaced (5.9% in February 2020, compared to 5.3% in January 2020), and was higher than the sample as a whole (5.5%). The incoming rotation group had a higher participation rate than the group it replaced (66.6% in February 2020, compared to 65.2% in January 2020), and was higher than the sample as a whole (66.5%).