The Reserve Bank of Australia (RBA) said there are signs of weakness in domestic economic conditions and a high level of uncertainty, when the board met for its September meeting.
In considering the policy decision, the RBA said members observed that the global economy had been experiencing an uneven recovery after a very severe contraction in the first half of 2020.
"Some economies with high or rising COVID-19 infection rates had recently lost momentum. In contrast, economic growth had been relatively strong in China. The future path of the recovery was highly dependent on containment of the virus," the RBA said.
"The Australian economy had been going through a very difficult period and was experiencing the biggest shock to economic activity since the 1930s. Nevertheless, members noted that the downturn had not been as severe as earlier expected and a recovery was under way in most of Australia."
|Sponsored by Jamieson Coote Bonds|
8 reasons to hold high grade bonds today
However, the board noted that recovery was likely to be uneven, with the COVID-19 outbreak in Victoria having a major effect on the economy.
"Uncertainty about the health situation and the future path of the economy was continuing to affect the spending plans of many households and businesses. Wage and price pressures remained subdued and this was likely to continue for some time," the RBA board said.
The board agreed that the policy package implemented in March alongside the governments stimulus package was continuing to support the economy.
"There was a very high level of liquidity in the Australian financial system and the policy package had helped to lower funding costs," it said.
"Members noted that the Australian banking system, with its strong capital and liquidity buffers, had remained resilient and was helping the economy traverse this difficult period."
Despite the re-introduction of stage four lockdowns in Victoria, and continued global impacts, the RBA noted that public sector balance sheets in Australia were strong, which allowed for the provision of continued support.
They considered it likely that fiscal and monetary support would be required for some time given the outlook for the economy and the labour market.
The board said it remains committed to supporting jobs, incomes and businesses in Australia and agreed to maintain highly accommodative settings as long as required and to continue to consider how further monetary measures could support the recovery.
Read our full COVID-19 news coverage and analysis here.