Morrison has been loathe to provide stimulus that may jeopardize a promised return to surplus this fiscal year, even after the central bank urged his government to help facilitate spending on major projects.
Reserve Bank of Australia chief Philip Lowe has called for the government to tap record-low borrowing costs to ramp up investment in roads, railways and bridges to support economic growth and employment as the central bank’s conventional interest-rate ammunition comes to an end.
Treasurer Josh Frydenberg has so far resisted bringing forward additional income tax cuts, maintaining he’s already doing enough to support the economy. Morrison will maintain that stance in Wednesday’s speech.
“A panicked reaction to contemporary challenges would amount to a serious misdiagnosis of our economic situation,” Morrison will say in the speech. “A responsible and sensible government does not run the country as if it is constantly at DEFCON1 the whole time, whether on the economy or any other issue.”
While the ideal of a budget surplus is laudable, the government bond market is suggesting a lot more stimulus is required to reignite animal spirits. Easing mortgage rules, fiscal stimulus and lower interest rates are have all been implemented in the last few months to support growth but Australia has among the world’s highest consumer debt to GDP ratios. That suggests continued commitment to supporting the economy is going to be required if the expansion is to persist.Click HERE to subscribe to Fuller Treacy Money Back to top