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Economic headwinds require strong economic management

Media Releases

Date : 07 May 2019

THE HON JOSH FRYDENBERG MP
TREASURER

MEDIA RELEASE

ECONOMIC HEADWINDS REQUIRE STRONG ECONOMIC MANAGEMENT

The Reserve Bank of Australia has decided to leave the cash rate at 1.5 per cent, unchanged since August 2016.

In this year’s Budget, global growth was downgraded to 3½ per cent for 2019 and 2020 following a loss of momentum in the second half of 2018, which has extended in to the current year. The IMF has also since downgraded global growth further to 3.3 per cent in its latest World Economic Outlook warning that “this is a delicate moment for the global economy”.

The RBA in its statement said “the outlook for the global economy remains reasonable, although the risks are tilted to the downside. Growth in international trade has declined and investment intentions have softened in a number of countries.”

At home, we face our own challenges with the impact of flood and drought, as well as a cooling housing market and its impact on household consumption.

Australia’s economic fundamentals remain sound. In its monetary policy statement, the RBA stated that the “labour market remains strong” and that “strong employment growth over the past year or so has led to some pick-up in wages growth, which is a welcome development.”

More than 1.3 million jobs have been created since the Coalition was elected driving down the unemployment rate to 5.0 per cent. More than 100,000 young Australians between the ages of 15 and 24 found jobs last year – the highest number in Australia’s history. Welfare dependency is at 30-year low and we are delivering the first Budget surplus in 12 years.

The RBA expects “the Australian economy to grow by around 2¾ per cent in 2019 and 2020. This outlook is supported by increased investment in infrastructure and a pick-up in activity in the resources sector, partly in response to an increase in the prices of Australia’s exports.”

But we must not be complacent. The Morrison government is delivering pro-growth policies including lower taxes, record infrastructure spending and investment in skills. These policies will support the economy in the near term as well as boost Australia’s productive capacity, underpinning our prosperity.

We are delivering a surplus, beginning the journey towards paying back Labor’s debt. This is important as our interest bill has grown to more than $18 billion per year. The surplus will enhance our fiscal buffers, sending a strong signal to the market that we can meet the challenges that lie ahead. All at the same time as delivering record funding for schools, hospitals and roads.

In contrast, Bill Shorten has a plan to weaken the economy, create fewer jobs and deliver lower wages, with $387 billion in higher taxes. A weaker economy will put at risk Australia’s AAA credit rating, which was reaffirmed following the release of the Budget in April.

The last time Labor delivered a surplus was in 1989 – more than 30 years ago.

When Labor spends more, they tax you more and when Labor taxes you more they weaken the economy.

Australia cannot risk a return to Labor’s high tax and spend agenda.

@JoshFrydenberg on Twitter JOSH ON TWITTER