RBA Running Out of Room to Cut Rates, Australia’s Robb Says

Australia’s central bank is running out of room to implement emergency stimulus measures should they be needed with interest rates at historical lows, Shadow Finance Minister Andrew Robb said.

The central bank doesn’t have “a lot of room left if there was some other unforeseen event in the world economy to make a difference,” Robb, whose Liberal-National coalition is on track to win government at the Sept. 7 election, said in an interview with Bloomberg Television today. “The Reserve Bank has been relied upon, or pressured, to do the heavy lifting in the economy for the last few years.”

Robb’s Liberal-National coalition, helmed by Tony Abbott, and Kevin Rudd’s governing Labor Party are vying for stewardship of the world’s 12th-biggest economy amid slowing growth and rising joblessness. RBA Governor Glenn Stevens has cut rates by 2.25 percentage points since November 2011 and left the benchmark at a record-low 2.5 percent today.

The Treasury said Aug. 13 the budget deficit will widen as growth slows and unemployment rises to 6.25 percent by mid next year, from 5.7 percent in July. Government debt will peak at A$370 billion in April 2016, the Treasury projected. The opposition is vowing to cut red tape, reduce company taxes by 1.5 percentage points to 28.5 percent and abolish levies on mining profits and carbon emissions should it win power.

“We’ve got to restore an appetite for risk and investment in Australia,” Robb said. “It’s been snuffed out in many respects the last year or two with the overhang of all this debt and the regulations that have been imposed.”

The opposition led Labor 54 percent to 46 percent on a two-party preferred basis, according to a Newspoll published in the Australian newspaper yesterday. The coalition is in a “healthy condition” to win the election, Robb said.

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