Prime Minister Scott Morrison won’t be drawn on a possible interest rate cut by the Reserve Bank, saying any reduction is a decision for the independent central bank.
Financial markets see an increased likelihood of a cut in the 1.5 per cent cash rate after inflation figures released this week showed the annual rate unexpectedly drop to 1.3 per cent as of March, far below the Reserve Bank’s two to three per cent target.
This comes on top of last month’s unexpectedly soft economic growth figures, and at a time when the housing market is weak.
The need to stimulate growth through an interest rate reduction would undermine the government’s persistent rhetoric that the economy is strong.
Some economists believe a rate cut could come as soon as the central bank’s May 7 monthly board meeting, just days out from the May 18 election day.
“I don’t speculate on what the Reserve Bank does. They are their decisions and I’m happy for them to make those decisions,” Mr Morrison told reporters in Townsville on Friday.
Instead, he pointed to the strong jobs growth that has occurred under the coalition and an increase in the number of small and family businesses that have started up, providing more employment opportunities.
However, other recent data shows demand for workers is tapering off.
This month’s ANZ job advertisement series shows a six per cent drop in ads over the past year, while internet jobs ads data from the Department of Jobs and Small Business shows a 1.5 per cent decline in March, the biggest fall in six years.
However, Mr Morrison said there was some good news in the consumer price index report with electricity prices falling and childcare costs down eight per cent over the year under his government’s policies.
However, childcare costs did rise 1.9 per cent in the March quarter when the CPI was flat in the quarter.
If the Reserve Bank does cut the cash rate for the first time since August 2016, Treasurer Josh Frydenberg says the banks must pass the reduction on in full.
“I’d say to the banks treat your customers first – put people before profits and pass through to them the true benefits that flow from any interest rate changes,” Mr Frydenberg told reporters in Melbourne.
Shadow treasurer Chris Bowen told AAP the prime minister was out of touch with working people.
“Every time Scott Morrison and the Liberals tell Australians how well the economy is travelling under them there seems to be new data out showing that things are heading in the wrong direction,” Mr Bowen said.
“Just weeks ago, the government’s own budget showed that economic growth is down, consumption is down and wages are down.”