The Reserve Bank (RBA) cut rates this week to a historic low of 1 per cent in an attempt to stimulate the economy in order to maintain employment growth and increase disposable income (and, thus, consumption). The ALP have argued that 1 per cent interest rates signal a ‘national crisis’ and that successful economic stimulus is going to take more than a rate cut.
In response, they have pushed for the LNP to bring forward its tax cuts and to increase spending on infrastructure. RBA Governor, Phillip Lowe, has a more optimistic take, stating ‘the outlook for the economy remains reasonable’, but has also hinted that more could be done to stimulate consumption.
Of course, the question of what should be done to stimulate the economy (if anything at all) largely depends on how you frame the problem and, in particular, on how you explain its origins. Debates around the meaning and cause of economic crises are nothing new, and they have been blamed on everything from greed, to regulatory failure, poor economic theory, culture and excessive regulation.
Read the rest over at Eureka Street.