Philip Lowe Reserve Bank
Reserve Bank governor Philip Lowe (Image: AAP/Joel Carrett)

Tapering, shmapering.

Yesterday, ahead of the first Reserve Bank (RBA) board meeting of the year, we wondered how the Bank would resolve the tension between an economy recovering better than expected/feared, which in other circumstances would necessitate some tapering of monetary policy support, versus the looming impact of the government's cut-off of fiscal support, especially on demand.

At 2.30pm yesterday we got our answer: the RBA is worried that the government's cut-off will seriously affect demand, meaning the economy will need all the support it can be given, especially when the JobKeeper and JobSeeker subsidies end. The only tapering the RBA is interested in at the moment is how quickly the government is going to pull support out from under workers and businesses.