Government bond raisings surge

Governments issue bonds, and other financial instruments, to fund their activities and make debt-raising plans based on budgets and their actual revenue (income) and outlays (spending). Forecasting these is difficult in normal times, when local and international effects are influencing the economy,

The COVID pandemic makes the task even more fraught. A lockdown will increase welfare payments and mean businesses and households are remitting less to the government in tax payments.

In a speech earlier this month, Reserve Bank Governor Philip Lowe said hours worked declined 4 per cent in August, but there are signs that employers are wanting to hire in October and November ahead of lockdowns ending.

Many industries are reporting skills shortages but wages and prices do not seem to be rising.

When investors buy government bonds they loan money to governments, but governments also release money into the economy when they buy bonds back.

Dr Lowe said the Reserve Bank’s bond buying program was one facet of its ongoing and substantial support to the Australian economy.