Powered by MOMENTUM MEDIA

Stimulus must stay: Lowe

Lachlan Maddock
— 1 minute read

RBA governor Philip Lowe has warned that withdrawing the massive fiscal stimulus risks destabilising the recovery at a critical point.

While the Morrison government is already looking to wind back its stimulus packages, governor Lowe has warned that the removal of JobKeeper and JobSeeker could kneecap Australia’s economic recovery. 

“We’ve got to keep the fiscal stimulus going until the recovery is assured,” governor Lowe told the Senate select committee on COVID-19. “Particularly over the past decade, fiscal stimulus has been withdrawn too quickly and the economy has suffered.”

Advertisement
Advertisement

JobKeeper and JobSeeker have a built-in three-month review process that would allow the government to make changes or extend the scheme, and while the government has already warned that it intends to end the programs in September, governor Lowe believes they may need to be pushed out longer. 

“It may be in six months’ time we bounce back well and the economy is doing reasonably well and these schemes – which were temporary in nature – can be withdrawn without problems,” governor Lowe said. “But if the economy is not recovered reasonably well by then, as part of that (JobKeeper) review we should be looking at perhaps the extension of that scheme or perhaps a modification in some way.”

Governor Lowe also conceded that with interest rates as low as they can go, monetary policy could no longer be the main tool for managing the economy in the foreseeable future. 

“There’s a limit to what we can do,” governor Lowe said. “Going forward, fiscal policy will have to play a more significant role in managing the economic cycle than it has in the past. For the past 20 years, monetary policy has been the main swing instrument… In the next little while, there’s not going to be very much scope to use monetary policy in that way and so I think fiscal policy will have to be used.”

 

Stimulus must stay: Lowe
investordaily image
ID logo

related articles

promoted stories

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.