Josh (Frydenberg, Treasurer) is about to return a budget surplus…This year.
Phil (Lowe, Governor of the Reserve Bank) is about to cut rates again…on Tuesday, my 54th birthday.
At a meeting in Armidale this week Phil pretty much flagged a cut in the cash rate to 0.75% on Tuesday.
Josh just turned 48, so he was still in short pants when I left school. Phil is older and smarter than both of us.
The following exchange at the Armidale meeting between a student, “Jackson” and Dr Phillip Lowe was reported by Patrick Commins of the Australian Financial Review today
Jackson: “What will low rates mean for my future super balance?”
Phil: “Not much.”
Phil: “We need far sighted structural reform to create the conditions in which business want to invest, expand, innovate and hire. We can move the monetary and fiscal levers but unless we can make businesses invest, we are going to be in this world of low interest rates for a long, long time.”
If Josh and Phil were on my payroll (actually as taxpayers, they are both on yours and my payroll) I would tell them to have an all-day offsite-meeting:
Nut out what is the single best idea right now, today for Australia to improve Jackson’s super balance
Put The Jackson Plan on my (our) desk in the morning.
They would both come up with an obvious answer: Borrow several billion dollars for ten years at almost zero interest rates and build cleaner smarter better transport, infrastructure, energy and water projects, generating income and capital growth way above the cost of money.
This would employ more people in these projects who would in turn spend more money, inject some long forgotten wages growth, kick start the economy. Not rocket science.
This would take a baseball bat to inverse yield curves and fears of a recession.
Tony Bates
Senior Wealth Advisor
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