News

RBA set to cut rates in the wake of federal election result

22 May 2019

In the wake of the surprise federal election result the Reserve Bank has indicated a rate cut is likely next month and wants the Morrison Government to join in stimulating the national economy.

RBA governor said this week that it was unemployment that was the key driver in keeping down inflation and a rate cut could now be necessary to turn it around.

“A lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target,” he said.

“Given this assessment, at our meeting in two weeks’ time, we will consider the case for lower interest rates.”

Dr Lowe made a point of calling on federal and state governments who embark on structural reform to assist the RBA with stimulating economic growth and employment.

“I think it would be a mistake to rely solely on monetary policy here,” he said.

“What will drive stronger growth is structural policies that promote firms hiring people, investing and being innovative and expanding.”

“Things like education policy, the attitude towards entrepreneurship and innovation, the way we invest in infrastructure, the design of the tax system – these are the things that ultimately drive economic growth.”

“I would be advising all governments to make sure they’re investing in infrastructure that creates jobs and gives us increased supply capacity.”

“I’ve been a strong advocate for increased spending on infrastructure, not only because it helps with demand management, it adds to supply capacity in the economy and makes a lot of lives better.”

The RBA recently downgraded its forecast for GDP growth from 3 per cent to 2.75 per cent in 2019.

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