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Australia c.bank to announce A$100 bln QE next week

Credit: REUTERS/JASON REED

Australia's central bank will likely expand its government bond buying programme by about A$100 billion ($71.29 billion) at its meeting next week, targeting longer duration securities, according to a Reuters poll of 14 economists.

By Swati Pandey

SYDNEY, Oct 28 (Reuters) - Australia's central bank will likely expand its government bond buying programme by about A$100 billion ($71.29 billion) at its meeting next week, targeting longer duration securities, according to a Reuters poll of 14 economists.

An overwhelming majority of respondents believe the Reserve Bank of Australia (RBA) will expand its quantitative easing programme to include five-to-ten year Australian government and semi-government bonds at its Nov.3 board meeting, the poll showed.

The RBA is also widely expected to trim its cash rate as well as the target for three-year government bond yields by 15 basis points to 0.1% at the meeting, according to a separate poll conducted earlier this month. AU/INT

Economists say the RBA's balance sheet could easily approach A$500 billion by the middle of next year, equal to about a quarter of Australia's annual gross domestic product (GDP).

However, they are divided on the approach policymakers might take for the bond buying programme, the poll shows. (See table below)

Westpac and Bank of America are among those predicting an "open-ended" bond buying programme, meaning the RBA would not commit to a number.

"We think the RBA will try to maintain maximum flexibility," said Bank of America economist Tony Morris.

Morris expects around A$75 billion to A$100 billion in outright bond purchases of five to 10-year bonds by end-2021.

"This could change in line with a flexible approach to the ongoing mix of the unconventional policy package," he added.

AMP economist Shane Oliver expects a monthly bond buying program of around A$12 billion with a commitment to continue it as long as necessary, saying it "will convey more conviction than say a fixed amount of A$150 billion spread over 12 months."

Others such as ANZ predict around A$100 billion of QE, targeting the five-to-ten year part of the yield curve to help lower long-term borrowing costs.

Bank

Qty expected

Timeframe

AMP

A$12 bln per month

end-2021

ANZ Banking Group

A$100 bln

mid-2021

Bank of America

A$75-A$100 bln

end-2021

Capital Economics

A$150 bln

end-2021

Commonwealth Bank

A$100 bln

open-ended

Citi

A$150-A$200 bln

in February

Goldman Sachs

A$100 bln

not specified

JPMorgan

A$100 bln

in February

Macquarie

A$100-A$150 bln

mid-2022

Morgan Stanley

A$5 bln per month

no end-date or maturity target

NAB

A$143 bln

end-2021

RBC

A$100-A$180 bln

end-2021

TD Securities

A$80-A$100 bln

end-2021

Westpac Banking Group

Open-ended

open-ended

($1 = 1.4027 Australian dollars)

(Reporting by Swati Pandey; Editing by Simon Cameron-Moore)

((swati.pandey@thomsonreuters.com; +61 2 9321 8166; Reuters Messaging: twitter.com/swatisays))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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