News

Should the RBA cut rates again in February? Opinion is divided

22 January 2020

Major bank economists are expecting the RBA to cut interest rates to a new record-low of 1.5 per cent in February but there’s plenty of industry opposition to it.

Some former Reserve Bank board members and economists say another rate cut is unnecessary and that it would be better for the government to focus on fiscal policy instead.

Laminar Capital economist Stephen Roberts is one such economist and spoke to Australian Financial Review.

“It’s going to be very difficult for the RBA to find a handle as to why it should cut again and I think the RBA will want to wait and see how some of these stronger data points play out,” he said.

Former RBA director Jillian Broadbent also spoke to AFR and says it is getting harder for the central bank to keep cutting rates.

“I certainly look at the rate cut decisions and I say ‘I don’t know about that’, but we are in unchartered waters at the moment so I think decisions should be respected,” she said.

“We are also in very competitive times for central banks too, especially in terms of currencies, so I have faith in what the central is doing.”

Another former RBA director, Roger Corbett, says the government should make fiscal policy a priority.

“The emphasis now needs to be on fiscal policy and the government has a great challenge to address further economic reform, which is going to be absolutely mandatory,” he told AFR.

“Any government can give away money but what we need is fundamental taxation reform that encourages the distribution of wealth to entrepreneurial enterprise, which I the seat of economic growth.”

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