REVEALED: Key to reopening borders and economy
The key to opening up the economy and reopening the states' borders has been revealed, but the success of it working is currently hanging on a knife edge.
Reserve Bank boss Philip Lowe said NSW containing its outbreak was the test case which could give Australians the confidence that the virus will be beaten.
It comes as he warns unemployment will hit 10 per cent by the end of the year and stay up around 7 per cent for years to come.
Dr Lowe said NSW was an important test case.
"If NSW can manage some limited community transmission with first rate testing, with contract tracing and isolation when cases arise, then we should be able to open up the economy," he said.
"It will give confidence we can keep on top of it. Any development of confidence, I would hope from an economic perspective that we could open our borders.
"If NSW can't make this a success then we face a whole lot of challenges."
Dr Lowe said the border closures were a double-edged sword, showing some short-term costs to some sectors, but also short-term positives as it boosts confidence within closed of states for people to spend.
"The reality is the economy is not going to recover until we get on top of this virus," he said.
"Even if there aren't restrictions in place people aren't going to spend if they're concerned about the virus."
Dr Lowe said the impact on the virus was less severe than originally anticipated, but the economic recovery will be slower than hoped.
"From the outset there was a very strong sense that we needed to build a bridge to the other side when the virus is contained. That bridge has had to be longer than we might have hoped to be necessary, even so, it's been the right strategy," Dr Lowe said.
In some good news, interest rates are expected to remain at their record low rate of 0.25 per cent for at least three years to come.
He also said the increase in public debt - to pay for the $100 billion JobKeeper and more again for JobSeeker - was "manageable and affordable".
"It's the right thing to borrow today to support people, to keep them in jobs," he said.
Originally published as REVEALED: Key to reopening borders and economy