Industry calls for RBA rates cuts to be reinforced by action

Photo: Reserve Bank of Australia

Businesses are sure to welcome the Reserve Bank of Australia (RBA) having slashed interest rates to a record low of 0.5 per cent, however, the Australian Industry Group (Ai Group) and Business Council of Australia are calling for this to be supplemented by other measures.

“Businesses will welcome (the) interest rate cut, which may make a small positive difference in their willingness to borrow and may bring forward an eventual turnaround in consumer spending. “However, as the RBA has been saying for some time, the remaining scope for monetary stimulus is now severely limited and should be supplemented by other measures,” chief executive of Ai Group, Innes Willox, said.

“Business investment will stimulate local manufacturing, construction and business service industries and jobs growth both in these sectors and in many of the businesses who will bring forward and increase investment.”

Measures should include the federal government introducing a generous investment allowance to boost activity and jobs growth and to underwrite a much-needed rise in productivity, according to the statement issued by Ai Group. The association represents the interests of businesses in an expanding range of industry sectors including manufacturing.

“With households still building buffers into their balance sheets and with infrastructure spending already accelerated, a serious boost to business investment is the sensible fiscal option.

“The Government should not wait for the May Budget to introduce the investment allowance. This would be more likely to delay investment than stimulate its revival,” Mr Willox said.

While the RBA earlier this week slashed interest rates to a record low of 0.5 per cent in order to contain the economic fallout from the escalating coronavirus crisis, it has now cut interest rates four times within the past year with the Australian economy in the midst of a housing downturn and needing to recover from an unprecedented bushfire season.

Meanwhile, the Business Council of Australia highlights that Australia’s economy is resilient, however, it is not immune.

“Private sector investment remains the crucial missing link in building a competitive and growing economy that delivers for all Australians,” Business Council chief executive, Jennifer Westacott, said.

“The national accounts show that business investment has fallen for the past two quarters and productivity, which drives wages growth, has been flat for more than three years.

“We continue to call for an economy-wide investment allowance to boost growth, supercharge the private sector economy and protect Australians as we enter a period of even greater economic uncertainty.

“Australia can’t control the global economy but we can prepare ourselves for unexpected shocks by boosting investment and driving the private economy harder. An investment allowance will encourage businesses to invest, innovate, export more, help build new industries and give Australians the chance to move into new markets and new sectors.

“Our leaders must now double down to deliver reforms that build strong and sustained economic growth through a vibrant private sector economy,” Westacott said.

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