With clear signs of economic weakness, the Coalition must think about fiscal stimulus and job creation, even if it comes at the expense of the budget surplus, writes Catholic Social Services Australia’s Joe Zabar. Source: Eureka Street.
The Reserve Bank of Australia’s recent decision to lower the official cash rate by 25 basis points to 0.75 per cent should be sounding alarm bells for the government. This latest cut is the third since May 2019 and reflects ongoing weakness in the Australian economy.
Treasurer Josh Frydenberg’s attack on banks for failing to pass on the full rate cut to consumers is a political distraction. Mr Frydenberg and his Treasury officials are well aware of the precarious state of the Australian economy, but they dare not name it for fear that any negative sentiment from the Government could trigger further unravelling of the economy and their prized surplus.
There are two clear signals coming out of the RBA’s latest cut. Firstly, monetary policy is not enough to spark a revival of the Australian economy. Secondly, it’s now all about jobs. Mr Frydenberg and his officials would be wise to heed these signals given that it was only 12 months ago that the RBA was considering lifting the official cash rates. The message for the Government is jobs, jobs and jobs.
While the Government might take some joy in an unemployment rate sitting at around 5.2 per cent, the rate of people looking for more hours of work sits at around 8.5 per cent. Combined, there are close to 1.9 million people being under-utilised because the economy is unable to deliver enough jobs or hours of employment.
The RBA is clear that unemployment and underemployment need to be addressed and, given the current global environment, now is the time to be looking at how best to do this.
In terms of fiscal stimulus, the RBA and most economists have argued for increased infrastructure spending. Such a strategy needs to include supporting shovel-ready, small-scale infrastructure projects, including building new social and community housing stock. Next is to increase payments to those who will spend it. Here the Government would be wise to lift Newstart and home in on families with children by increasing Family Tax Benefits. Finally, we should pilot a jobs guarantee program for those over 50 and people living in rural and regional Australia.
Joe Zabar is deputy CEO and director of economic policy at Catholic Social Services Australia.
Jobs key to reviving flailing economy (Eureka Street)
Treasurer rejects stimulus push, defends reform plan (Sydney Morning Herald)