Consumers appear worried about the direction of the economy but Reserve Bank of Australia Governor Philip Lowe is taking a more positive tone than he did when rates were cut to record lows.
New data shows Australians want to work more hours, and the Westpac consumer sentiment survey for July showed Aussies were pessimistic about their prospects.
“Of concern for consumers looking forward is the labour market, with unemployment expectations now clearly above average for the first time since mid-2017,” Westpac senior economist Elliot Clarke said on Friday.
Dr Lowe last week spoke about the need for more infrastructure spending and job creation to drive wage growth and inflation.
But after a meeting with Treasurer Josh Frydenberg on Thursday he was more upbeat about the economy.
“The Australian economy is growing and the fundamentals are strong,” Dr Lowe said.
“The outlook is being supported by our lower interest rates, by your tax cuts, by higher levels of investment in infrastructure, by a pick-up in the resources sector and the stabilisation of the housing market.
“But I don’t think we should forget that more Australians have jobs today than ever before in Australian history. That’s a remarkable achievement.”
Financial services company UBS predicted another bad quarter for inflation growth, leaving open the possibility of interest rates dropping below the existing record low rate of one per cent.
“While significant policy stimulus is coming to support the outlook – including tax cuts and rate cuts – the starting point for the economy keeps getting materially worse,” UBS’s Australian economic outlook said.
“Hence, we still expect the RBA to cut the cash rate by another 25 basis points by November 2019, but with risk of more and earlier easing.”
Mr Frydenberg this week played down calls for the federal government to spend more on infrastructure, pointing to the coalition’s 10-year, $100 billion infrastructure plan.
But economists say that spending is in line with the long-run average, and states like NSW and Victoria are doing the heavy lifting on infrastructure.