The Reserve Bank has cut rates to a new record-low of 1 per cent and it isn’t backing away from criticism by saying it’ll cut again if it has to.
Amid doubts from some that this second rate cut in a row will do much to stimulate the economy or put more money in people’s pockets, RBA governor Philip Lowe said he expects disposable incomes to pick up with imminent federal government tax cuts and more positive signs from the property market.
“There has been little inroad into the spare capacity in the labour market recently, with the unemployment rate having risen slightly to 5.2 per cent,” he said in a speech this week.
“Given the circumstances, the board is prepared to adjust interest rates again if needed to get us closer to full employment and achieve the inflation target.”
The ANZ passed on the 0.25 percentage point cut on to customers in full while the other three majors passed on some of the cut.
Dr Lowe said he’d like to see more infrastructure spending as fiscal stimulus to accommodate monetary policy.
“We should not rely on monetary policy alone,” he said.
“One option is fiscal support, including through spending on infrastructure.”
“We will all achieve better outcomes for society as a whole if the various arms of public policy are all pointing in the same direction,” he said in his speech in Darwin this week.
Plenty of critics say that the impending tax cut package from the federal government is more important to give the economy the jolt it needs and Treasurer Josh Frydenberg used the RBA cut to ramp up pressure on Labor to pass the tax cuts in Parliament.
“The government’s plan, including significant tax cuts of which the legislation will be introduced into the Parliament today, will boost household consumption and overall economic activity,” he told Australian Financial Review.
“The Coalition’s tax package should be passed in full.”
In its monetary policy statement, the RBA said the housing markets in Melbourne and Sydney were showing signs they were stabilising.
“Conditions in most housing markets remain soft, although there are some tentative signs that prices are now stabilising in Sydney and Melbourne,” the minutes read.
The RBA minutes go on to say the central bank will continue to monitor the jobs market closely before deciding whether or not to cut interest rates again later this year.