Australian fund managers are preparing for RBA QE

Australian fund managers interest-rate cuts won’t be enough to combat economic slowdown and the Reserve Bank of Australia (RBA) will have to do quantitive easing (QE) – an unconventional monetary policy in which a central bank purchases government bonds or other securities from the market in order to boost money supply and encourage lending and investment.

Key quotes (Bloomberg)

Unorthodox monetary policy is definitely a scenario we have to prepare for. Everyone’s talking about QE. QE could come even before any recession, said Susan Buckley, QIC’s managing director for global liquid strategies, who is overweight Australian credit.

“Look across the developed world and if you can show me a country that’s averaged 2.5% inflation over the past 10 years then you’re doing a better job than me. Why would Australia be the country that achieves that when no one else has,” said Chris Rands, portfolio manager at Nikko Asset, who is loading up on semi-government bonds. 

Stuart Dear, deputy head of fixed income at Schroder Investment Management Australia Ltd. expects bonds with maturities shorter than five years to outperform if the RBA embarks on QE.