Economic ‘turning point’

RBA tips growth lift but says more can be done

RESERVE Bank Governor Philip Lowe believes the nation’s economy may have reached a “gentle turning point”, paving the way for growth to pick up next year.

But Dr Lowe has again reminded governments there is more they could do to get the economy moving, as uncertainty borne of global trade tensions continues to swirl.

The central bank this week revised down its growth forecast for 2019, from 2.75 per cent to 2.5 per cent.

Dr Lowe said despite that, there were signs the economy’s fortunes were changing, on the back of lower interest rates and recent tax cuts.

The depreciation of the Australian dollar, a brighter outlook for mining investment and some stabilisation in the housing market have also been helpful, Dr Lowe (pictured) told a hearing in Canberra.

“There are signs the economy may have reached a gentle turning point,” he told the Federal Parliament’s economics committee yesterday.

“Consistent with this, we are expecting the quarterly GDP growth outcomes to strengthen gradually after a run of disappointing numbers.”

Taking into account the positive developments, the RBA has kept its growth forecast for 2020 at 2.75 per cent.

“It is reasonable to expect that, together, these factors will see growth in the Australian economy return to around its trend rate next year,” Dr Lowe said.

He said the 2019 forecast was lowered because Australians have been spending less, amid slow wages growth and recent house price falls.

The Reserve Bank held the cash rate at a record low 1.0 per cent on Tuesday, after reducing the rate by a quarter of a percentage point in both June and July.

Dr Lowe said the possibility of lower interest rates remained on the table while inflation was well below the RBA’s target band and there was slack in the jobs market.

But the governor reiterated his belief that monetary policy was not the only avenue for stimulating the economy, suggesting governments could turn to fiscal support, such as extra infrastructure spending.

Structural policies that help businesses grow would also be beneficial, he said.

“We will all do better if Australia is viewed as a great place to expand, invest, innovate and employ people,” Dr Lowe said.

Structural reforms would also boost productivity, which has slowed “noticeably” in recent times.

“If this slowing is maintained, it will become a serious issue,” Dr Lowe said.