Last week, the International Monetary Fund (IMF) released a report in which it warned that the global economy is facing a “synchronised slowdown”, with global growth downgraded to 3 per cent – its slowest pace since the global financial crisis.
The weakness in the global economy has prompted calls for expansionary fiscal policy, amid fears that the Reserve Bank of Australia’s (RBA) rate cuts have failed to drive consumer spending.
Speaking to the media, Treasurer Josh Frydenberg acknowledged the weakness in consumer spending, which he attributed in part to the rate cuts and to trade tensions between the United States and China.
“There’s no doubt, I think, when people look globally, the trade tensions particularly between the US and China, that is affecting their level of confidence, and when the interest rates are cut quite significantly as they have been, that is also giving them a reason to [restrict their spending],” he said.
However, when asked if the government would consider accelerating its reform agenda to take pressure off the RBA, Mr Frydenberg said the timing isn’t right, adding that the government would wait for its recent taxation reforms to filter through to the broader economy.
“[When] we do significant reforms, we shouldn’t just move on to the next thing as quick as you can say Jack Robinson,” he said.
“What I mean there is we’ve just passed through the Parliament more than $300 billion of tax cuts. We’re getting rid of a whole tax bracket.”
He continued: “That is really significant reform which will change the nature of our tax system to become more competitive, to become simpler and stronger.”
Mr Frydenberg said he’s confident in the resilience of the Australian economy, pointing to comments made by former treasurer Peter Costello.
“When you’ve got unemployment at 5.3 per cent, when you’ve got inflation at 1.6 per cent, when you’ve got a balanced budget, when you’ve got a trade surplus, on all those indicators, that is a sign of a good economy,” he said.
“[We] need to be absolutely realistic about the challenges we face, and we don’t downplay them.
“At the same time, we can’t lose sight of what our goal is, which is of course strong budget management and a strong economy.”