Rate cut decision comes at a time of rising global uncertainty

“While not without some risks, today’s further easing of monetary policy by the Reserve Bank is a welcome move that will reduce the costs of investing and help boost domestic consumption. The decision comes as domestic conditions appear to be gradually improving but with uncertainty again on the rise as many of the world’s major economies restrain activity in the face of further COVID-19 waves,” Innes Willox, Chief Executive of the national employer association Ai Group said today.

“The rate cuts will reinforce the stimulatory impacts of the personal income tax cuts; the write-off provisions for business investment; and the continuing direct payments to households and businesses. Further, today’s measures should help keep a lid on exchange rates – at least in the short-term – and this will help preserve competitiveness for exporters and import-competing producers. The risks include adding fuel to asset price inflation and reduced incomes for households reliant on interest payments on their savings.

“After today’s action on monetary policy, any remaining stimulus will be almost totally dependent on fiscal policy measures including through the rapid deployment of infrastructure spending. The federal, state and territory Governments will need to be ready to take further action if it is necessary.

“Monetary and fiscal stimulus, while critical to the pace of recovery in activity and jobs over coming months, will need to be backed up with more fundamental changes to the effectiveness of the domestic economy. A new program of measures should prioritise the development of our workforce and business capabilities; the rejuvenation of workplace productivity; encouraging innovation and investment; and providing clarity, certainty and stability to energy and climate policy,” Mr Willox said.

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