The Reserve Bank has urged the Morrison government to consider new policies to encourage employers to train and employ staff, warning another interest rate cut alone will not do the job.
The Reserve Bank governor Phillip Lowe today signalled official interest rates could be cut below 1 per cent in an attempt to kickstart the economy.
This month’s official interest rate cut was the first in three years but the cut in the cash rate to just 1.25 per cent may not be the last.
In a speech in Adelaide, Mr Lowe warned that politicians needed to do the heavy lifting in terms of policy, because the RBA interest rate cuts alone will not deliver the change required.
“One contributing factor here is an underinvestment in staff training. In the shadow of the global financial crisis many firms cut back training to reduce costs. We are now seeing some evidence of the adverse longer-term implications of this. As the labour market tightens further, I would hope that more firms are prepared to hire workers and provide the necessary training.” Mr Lowe said.
Mr Lowe said homeowners and investors should expect further interest rate cuts.
“As you are aware, the Reserve Bank board reduced the cash rate to 1.25 per cent at its meeting earlier this month. This was the first adjustment in nearly three years,” he said.
“It would, however, be unrealistic to expect that lowering interest rates by a quarter of a percentage point will materially shift the path we look to be on. The most recent data – including the GDP and labour market data – do not suggest we are making any inroads into the economy’s spare capacity. Given this, the possibility of lower interest rates remains on the table.
“It is important though to recognise that monetary policy is not the only option, and there are limitations to what can be achieved. As a country we should also be looking at other ways to get closer to full employment. One option is fiscal policy, including through spending on infrastructure. Another is structural policies that support firms expanding, investing, innovating and employing people.”
The RBA’s message of the need for economic stimulus is also bolstering the Morrison government’s push to quickly pass the July 1 tax refunds of $1,080 for 10 million Australians.
But because the Prime Minister remains committed to passing the entire package, pressure remains on Labor and the crossbench. Talks are continuing with Centre Alliance that has previously called for limits on gas exports to bring down power prices.
Pauline Hanson said today the government had indicated it will not “do deals” on the legislation and Independent Jacqui Lambie is yet to declare her hand.
But Victorian Labor MP Peter Khalil said today Labor should wave though the entire package.
“In the scenario that looks increasingly likely, which is that they will not split the tax cut package, my view is Labor should not block tax cuts that will benefit millions of working and middle-class Australians,” Mr Khalil told the Herald Sun.
“If that means we are not given any choice other than to pass the entire package, then that is what we should do.”
Mr Khalil is the first Labor MP to back the entire tax cut package, prompting an enthusiastic response from Acting Prime Minister Michael McCormack.
The New Daily has previously reported that shadow cabinet agreed during a preliminary discussion that it backed the Stage 1 $1080 tax cuts and was open to Stage 2 but did not support Stage 3 that comes into effect from 2024.
The concerns over stage 3 relate to the fact that the lion’s share of the $95 billion tranche of the tax cuts goes to high-income earners.