There has been no champagne-cork popping following the RBA's cheeseparing rate cut of this week. Maybe the fizz of low-alcohol plonk, but that costs more than the real deal anyway. Yes, any rate cut is welcome but the austerity of the past couple of years needs more than a presser and a miserly 0.25% cut. The Australian Industry Group urges caution for small businesses - the worst may not be over.
Innes Willox, Chief Executive of national peak employer body the Australian Industry Group says: "The Reserve Bank’s decision to lower the cash rate to 4.1% reflects the progress made on inflation, but should not be seen as a sign that victory can be declared or that the economy is robust.
"This decision offers some much-needed relief to businesses and mortgagee households, and will hopefully provide a fillip to kickstart the very weak growth rate in the Australian private sector economy. The Bank has made clear that we should not expect another rate cut any time soon because our economy remains exceptionally fragile.
"The reality is that while headline inflation has continued to fall into the target band, the outlook remains subject to considerable uncertainty. Much of this progress has been due to price suppressing budget measures by federal and state governments, whose future path remains uncertain at this stage in the electoral and budget cycles.
Uncertain global outlook
"Meanwhile, the global economic outlook is extremely uncertain due to policy shocks emanating from the US. The risk that the announced and forthcoming tariffs from the Trump Administration are pro-inflationary and will be transmitted to Australia - they must be taken very seriously.
"As the RBA rightly notes in its decision, there are risks on both sides of the economic outlook. Monetary policy still remains restrictive, and the job of sustainably delivering inflation to target is not yet over.
“Today's decision reflects the significant progress made towards restoring stable inflationary conditions, but we must remain on guard for future shocks to our economy.
“The chorus of pressure from government, commentators and market economists on the board in recent weeks has been unprecedented. It is commendable that, for what it believes are sound economic reasons, the board has resisted this pressure.
“The board and its operations are now more transparent than they have ever been, but that does not provide licence for outsiders to demand it act in a particular way that suits their interests.”
Ends
Editors comment: Errr..."does not provide licence for outsiders to demand it act in a particular way that suits their interests?" Well that sounds like an attack on freedom of speech and media. Analysts, auditors or anyone else do not require a licence to promulgate views that may be contrary to those of government bodies - including the RBA. In a democracy, no government body, elected or otherwise, should be immune from examination and criticism where appropriate. Who are these 'outsiders'? You , me and the neighbours perhaps? Maybe the sentiment was poorly expressed but, in the meantime...Phooey!
The latest example of the need for close scrutiny of government bodies comes from the Victorian head of the AiGroup, Tim Piper: "
"With the (Victorian) Auditor General signalling an $11.6 billion increase in costs in one year on Victoria's major projects, there should be much hand wringing by the Government and moves to quickly deal with such outrageous cost increases. Instead, the Victorian Government has chosen to double down on the worst of the projects and shoot the messenger, the State's Auditor General." $11.6 billion blowout!? Incredible, there should be a Royal Commission.
