Via Ross Gittins today:
Morrison, with all his skiting about returning the budget to surplus he may have painted himself – and the economy – into a corner.
In a speech last week, Reserve Bank governor Dr Philip Lowe made it clear that cutting interest rates might not be enough to keep the economy growing…And consider this. The Reserve’s official interest rate is already at a record low of 1.5 per cent…What happens if all the shots have been fired, but they’re not enough to keep the economy growing? The budget – increased government spending or tax cuts – is all that’s left.
The economics of this is simple, clear and conventional behaviour in a downturn. All that’s different is that rates are so close to zero. For Morrison, however, the politics would involve a huge climb-down and about-face.
My colleague Latika Bourke has reported Liberal Party federal director Andrew Hirst saying that, according to the party’s private polling, the Coalition experienced a critical “reset” with April’s budget. The government’s commitment to get the budget back to surplus cut through with voters and provided a sustained bounce in the Coalition’s primary vote.
Yeh, sure, but ask the punters of they want SsoMo to do an about face as the economy falls apart. All but a few nutters will nod enthusiastically. It’s a non-issue unless ScoMo doesn’t stimulate when it is required.
Admittedly, that is partly the case today already, so he is behind the curve if not “in a corner”.
