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Australian Prime Minister Scott Morrison is rejecting calls to use improving government coffers to inject stimulus into the sluggish economy, even after the central bank was forced to cut interest rates to a record.
“I’m passionate about bringing the budget back to surplus for the first time in 12 years,” Morrison said in a speech in Tasmania state on Saturday. “It puts us in a position of strength and resilience to face whatever comes at this country.”
Morrison, 51, led his conservative government to an unlikely third term in May by campaigning almost primarily on delivering tax cuts and its economic record. Returning the budget to surplus this fiscal year was also a key election pledge, and he’s dismissed calls by some economists and political rivals to funnel stimulus even as growth slows.
“A balanced budget to me equals sovereignty and self-respect as a nation,” Morrison said on Saturday. He’s said that the A$158 billion ($107 billion) of tax cuts to be implemented over a decade that were legislated in July are expected to take time to filter back into increased household spending.
The Reserve Bank of Australia cut its cash rate to 0.75% on Tuesday, with Governor Philip Lowe saying in a speech hours later that “monetary policy still works” to support employment and income growth, and the rate cut would help improve those measures.
Ongoing uncertainty abroad and weak household spending are dragging on an economy that’s chalked up a record 28 recession-free years. Gross domestic product rose 0.5% in the second quarter, the slowest pace since the worldwide recession.
While Goldman Sachs Group Inc. strategists have said the RBA could be drawn into quantitative easing if it wants to achieve its inflation mandate without venturing into negative rates, Morgan Stanley has said it’s more likely the government will first turn to fiscal stimulus next year.
Australia in April forecast a budget surplus of A$7.1 billion for 2019-20, and last month reported an underlying cash deficit of about A$700 million for the 2018-19 fiscal year.
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