Treasurer Scott Morrison
has opposed further interest rate cuts by the Reserve Bank of Australia, saying it has “exhausted its effectiveness”.
“Its ability to impact and influence is diminishing,” he told The Australian Financial Review
in an interview in Washington on the weekend.
Instead of additional rate cuts, Morrison put the onus on the government to bring in measures that “boost incomes and lift living standards”.
To preserve the RBA
’s independence however, the Treasurer admitted that setting rates was a matter for the bank.
“There’s clearly more room there if that’s what the Reserve Bank governor and board thinks is necessary,” he said. “But if we continue on with the program we have, we will see our economy grow.”
These statements echoed similar sentiments in speeches to both investors in New York and politicians in Washington over the past few days.
Monetary policy was like “pushing against a string,” Morrison said.
“What’s more important for our economy is getting on with our fiscal consolidation and bringing forward productivity-enhancing reforms.”
This feeling on the diminishing value of low rates has seen a growing acceptance among central bankers and finance ministers – putting Morrison’s statements in line with the overall world view.
“Most central bank governors have expressed this, saying monetary policy doesn't fix this. At best, all monetary policy does is alleviate it for a period of time,” he told the AFR
After cutting rates in May and August, the RBA
decided to hold it steady at 1.5% at the beginning of October. The bank has said it will continue to observe the Australian economy and financial conditions before considering any further moves.