Australian Interest Rates and Dollar About Right, Treasurer SaysBy and
Job market continues to show slack, Morrison says in interview
Banking regulator has taken steps that ease pressure on RBA
The Australian dollar and official interest rates are at appropriate levels for the nation’s economy, Treasurer Scott Morrison said in an interview.
The remarks underscore a degree of comfort among Australia’s top policy makers that record low borrowing costs don’t need to be tweaked and that exporters can absorb the effects of a currency that’s climbed more than 9 percent this year, even as the end of a once-in-a-century mining boom constrains growth.
Morrison said slack in the jobless market -- unemployment at 5.6 percent is more than half a percentage point above what he sees as full employment -- illustrates the need for loose monetary policy. At the same time, steps taken by the banking regulator to cool a housing boom have taken pressure off the Reserve Bank of Australia to tighten.
“The bank has been making the right call on where we have rates,” Morrison told Bloomberg Television’s Kathleen Hays in an interview in Washington on Friday. “Our bank has been slow and patient on the way down and is being slow and patient when it comes to going the other direction.”
Australia has held rates at 1.5 percent since August 2016. Record household debt at 194 percent of income has helped fuel Sydney and Melbourne’s massive property-price growth. The RBA, which has been waiting to see the impact of macro prudential measures on home lending, has recently been encouraged by signs that conditions are easing in Sydney.
RBA Governor Philip Lowe has made it clear he’s in no hurry to follow global peers by moving rates higher, because Australia didn’t have to cut as low or undertake quantitative easing, and inflation remains contained.
“The initiatives taken by our banking regulator have addressed what has been going on in our housing markets, and that has removed the need for the bank necessarily to take decisions for that reason,” Morrison said. “Whether there are other reasons for them to raise in the future is a matter for them.”
The Treasurer also covered the following areas:
- Flat wages growth reflects the consequences of the end of a massive mining boom. Government is taking steps to drive investment and that should lift wages.
- The government is increasing investment in infrastructure through funding new airports, inland rail links, defense spending and hydro-electricity.
- House prices are based on underlying fundamentals. “The value of housing is high in Australia because they are real, based on supply and demand, not credit bubbles.”
- Exporters have adjusted to the Australian dollar’s resilience and can absorb the “vagaries of the currency.”
- Worries about trade wars and a spike in protectionism have eased. “For all the talk of protectionism, the bark has been far worse than the bite.”
- Overall economic outlook remains robust. “We have a good growth story.”