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Consecutive interest rate cuts and fiscal stimulus have left Australia with little leeway to revive the economy in the event of another recession, Deloitte Access Economics warned.
In its latest trade outlook report, published on Monday, Deloitte said the Australian economic slowdown seemed "well under control" as domestic revenue growth was on track and stimulus measures taken in the form of price cuts. income tax, rate reductions and more flexible lending rules.
This relatively positive badessment follows a meeting between Reserve Bank Governor Philip Lowe and Treasurer Josh Frydenberg on Thursday, during which Lowe tempered earlier warnings that the government needed to do more to stimulate the economy. 39; economy.
The Australian economy grew only 0.4% in March, contributing to a low annual growth rate of 1.8% over 10 years and two consecutive reductions of 25 percentage points each of the RBA in June and July.
Deloitte attributed the economic slowdown to falling house prices and drought, but noted that national income growth has remained at its long-term average due to rising prices for coal and iron.
According to the RBA, lowering rates were low not only because "the economy is slower than it has been, but mostly because it's been over." slow than it should "- as it aimed to reduce unemployment from 5.2% to 4.5% to raise wages and push inflation back into the 2-3% target range.
Deloitte said the Australian economy has "a lot of stimulus packages," including "reduced political uncertainty" after the Labor Party's loss of elections, $ 158 billion cuts in corporate income tax. Individuals, of which 8 billion will be delivered immediately, bank financing costs reduced lending standards in dollars and less stringent for home loans.
"The current conditions are better than many people think," he said. "And, in turn, this raises an important question: have decision-makers shot too many bullets now, leaving them running out of money in case of a bigger downturn at some point?"
The 1% cash rate was "now very little above zero" and, because the tightening of bank financing has eased, a lower cash rate "does not really allow the banking system to operate. Save a lot of money ".
"Or, in other words, we are starting to lack flexibility to reduce the borrowing costs of the economy.
"That does not mean the [RBA] should not have reduced rates. But that means there is a tradeoff to make: the more the number of [RBA] Boosting the economy now, the less money it has to stimulate it in the future. "
Deloitte said the tradeoff between looking for "more prosperity and social cohesion" by reducing unemployment, was that Australia "was taking more risks in the event of a future recession." "We can not have our cake and eat it too."
It also questioned the ability of regulators to help create the 200,000 jobs needed to reduce unemployment by 100,000 and lower the unemployment rate to 4.5%.
Deloitte said that there was a "solid chance" that the unemployment rate never reached 4.5% because the print currency was "not really effective", that economic reforms would not succeed quickly and that States were responsible for most infrastructure spending.
It was a "tragedy for those who were needlessly unemployed and underemployed," he said.
After disappointing GDP figures in March, Lowe called for "new investments" in infrastructure to absorb the unused capacity of the Australian economy, publicly exposing the RBA to contradict the government's position that existing fiscal measures were sufficient to stimulate the economy.
But on Thursday, Lowe accepted "100% with [Frydenberg] that the Australian economy is growing, "rephrasing its previous calls for structural reforms motivated by the desire to ensure that" Australia remains a privileged place for development, "he said. innovation, investment and the employment of people by companies ".
Frydenberg called the government's $ 100-billion infrastructure pipeline "very solid," but warned that capacity constraints were preventing progress on existing projects.
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