- In an address on Tuesday, Reserve Bank of Australia (RBA) Governor Philip Lowe said the country had ‘turned a corner’ — but future hurdles still remain
- The RBA Boss says the JobKeeper extension, combined with an increase in employment numbers, shows promise for the economy
- The number of employed Australians increased by 210,000 over June
- However, the economist warned of a pipeline of opportunities that might dry up for other workforces, such as construction jobs
- The RBA Governor said nurturing citizen health should be a priority to restore the economy
Reserve Bank Governor Philip Lowe has approved efforts by the Australian Government to curb COVID-19 impacts, but says more hurdles are ahead.
During an address to the Anika Foundation on Tuesday, Lowe particularly approved of the recent decision by the Federal Government to extend the JobKeeper and JobSeeker schemes.
“[It was brought] to our attention that the biggest policy mistake to make at the moment would be withdrawing the support too early,” he said.
“So I think it’s positive that the government’s continuing to support, and it’s positive that the banks have continued their support through loan deferrals”.
The Morrison Government recently decided to spend $20 billion on extending the support schemes for Australians until March 2021 — although eligibility to apply was tightened and payments will be reduced.
Both the JobKeeper and JobSeeker payments will be reduced in September.
Despite Lowe calling COVID-19 the worst impact on the Australian economy since the Great Depression, he assured the Government may have ‘turned the corner’ recently.
“In June, hours worked increased by four per cent, and the number of employed people rose by 210,000,” he said in evidence.
Although some sectors are seeing improvements, Lowe warned of a drying pipeline of work for other industries — such as construction.
The Governor described it as a ‘plateau’ of opportunities.
“While some firms are bouncing back in hospitality […] there are these other firms that are moving in the opposite direction,” he said.
“They’ve been able to survive because they had a big pipeline of work, that pipeline’s run off and they’re not getting many new contracts, some firms don’t want to invest”.
Bailing Government debts off the table
Lowe also fought off suggestions of ‘printing more money’ for the Government to spend on outstanding debts.
The Reserve Bank Governor said doing so would only cause an inflation on taxes in the future.
“The reality is there is no free lunch,” he said.
“The tab always has to be paid and it is paid out of taxes and government revenues in one form or another.”
Despite being firm against helping Government debts with new money, Lowe had assured to be supportive of the country’s economy.
“I can assure you the RBA will continue to support the economy until we’re confident that we’re making progress towards two-to-three per cent inflation and towards full employment,” he said.
Health is priority
Perhaps one of the most important takeaways from the RBA Boss’ speech was that nurturing citizen health was a priority.
“The fundamental thing is to address the health concerns and, if we can do that, then I think we can recover quite strongly,” he said in response to Victoria’s outbreak.
“If we can’t give people confidence about health, the recovery is going to be very bumpy and very drawn out”.
“We’re currently now starting a forecasting round and will provide a full set of economic forecasts in early August with the statement of monetary policy”.