The Reserve Bank of Australia kept its key interest rate at a record low level of 0.25% on Tuesday and said it would do “everything necessary” to meet its 0.25% target on three-year government bonds. The institution’s management is still forecasting a “very large” economic contraction in the next quarter.

“There is considerable uncertainty about the short-term outlook for the Australian economy”, said the Governor of the Reserve Bank of Australia, Philip Lowe. “Much will depend on the success of efforts to curb the virus and how long social distance measures should remain. However, a very large economic contraction is expected to be recorded in the quarter through June and the unemployment rate will rise to its highest level in many years”, added he.

Restrictions on the movement and gathering of large groups of people in one place have forced many businesses in the hotel, retail, transport, education, and public services sectors to close.

The Australian Service Performance Index dropped to 38.7 points in March, reporting its lowest since March 2009 and the fourth month of contraction.

Separate data from Australia and New Zealand Banking Group showed that job ads in Australia suffered their biggest decline for more than a decade in March.

Another ANZ and Roy Morgan survey found that consumer sentiment improved last week after drastic downturns after the government announced a JobKeeper plan to subsidize some employees.

The core index of the survey rose 10.1% from the previous week but still remains close to its lowest values ​​observed during the recession in the early 1990s.

Economists fear that unemployment may rise to 10% in the coming months, as large sectors of the economy have a negative impact on combating the virus. In February, the unemployment rate reached 5.1%.

“Prior to the JobKeeper Payments Announcement, we predict that more than 1.1 million employees may lose their jobs and the unemployment rate could rise to a peak of 13%”, says ANZ senior economist, Catherine Birch. “However, we believe that the JobKeeper payment will retain more employees in their positions and reduce the peak of unemployment, which is the economic version of the flattening curve”, added she.

Australia’s trade balance also fell to 4.36 billion AUD (2.67 billion USD), with tourism revenue down 15% in February, or 1 billion AUD in total in the last two months alone, Australian statistical data showed Bureau published on Tuesday.