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MoneyRBA's Philip Lowe calls for increase in infrastructure spending

06:10  08 september  2019
06:10  08 september  2019 Source:   theage.com.au

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Reserve Bank governor Philip Lowe is calling for a major spending program on infrastructure including rail, bridges and roads across Australia in direct opposition to the views of Prime Minister Scott Morrison. Mr Morrison said this week that the federal government was "starting to hit our head on the

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. Australia’ s central bank chief Philip Lowe faces another year of shouldering the burden of economic stimulus as the government prioritizes a budget surplus over turning around the weakest.

RBA's Philip Lowe calls for increase in infrastructure spending© Alex Ellinghausen RBA governor Philip Lowe says a truce in the US-China trade war could see the global economy rebound quickly.

Reserve Bank governor Philip Lowe is calling for a major spending program on infrastructure including rail, bridges and roads across Australia in direct opposition to the views of Prime Minister Scott Morrison.

Mr Morrison said this week that the federal government was "starting to hit our head on the ceiling in terms of how much infrastructure work you can get under way at any one time".

But Dr Lowe said, "I think we can do more" in an interview with The Sydney Morning Herald and The Age.

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Philip Lowe urges government to invest in infrastructure after bank cut official interest rates to The RBA on Tuesday cut the official cash rate to a fresh record low 1% and left the door open for another “It can help deliver the productivity growth that is the main source of sustainable increases in our

RBA Governor Dr. Philip Lowe finished his speech by saying ending the political uncertainty would also bring benefits. Not First Time Lowe Called Government Help. In early July, Dr. Lowe said two interest rate cuts in as “It is appropriate to be thinking about further investments in ( infrastructure )

The economy this week was revealed to be at its weakest in a decade. Amid calls to stimulate growth by stepping up infrastructure investment, Mr Morrison said the government was doing everything it could. That included asking the states to bring projects forward, he said.

Dr Lowe, however, said that there was scope for more new projects as well as more spending on maintaining existing public infrastructure.

"Right at the moment there is limited capacity to do more mega projects in Sydney and Melbourne but there is capacity elsewhere in the country to do significant projects, and also capacity to do a series of smaller projects," he said in the interview conducted for a profile published in Saturday's Good Weekend magazine.

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Search RBA website. The US–China trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans because of the increased uncertainty. The low level of interest rates, recent tax cuts, ongoing spending on infrastructure

RBA governor Philip Lowe said without a cut in interest rates, it was unlikely the bank' s forecasts for lower unemployment and a lift in inflation would be Treasurer Josh Frydenberg admitted the economy was facing headwinds but said the Coalition' s plans for 0 billion of infrastructure spending over

"Part of infrastructure investment is actually maintaining road, rail, bridges right across the country. It has the other advantage of making sure infrastructure spending is spread across the country and not just centralised in Sydney and Melbourne. There is capacity in some areas."

The head of Australia's central bank also said that resolving the trade war between the US and China was the "number one priority" for the world economy.

"It's affected the investment climate around the world. Because businesses are very nervous about investing in capital because they don't know what the tariff regime is going to look like, and they also don't know what the tech landscape is going to look like," Dr Lowe said.

"Is it OK to have Chinese components in your factory or not? When businesses are uncertain, they sit on their hands."

The governor said that the dispute could start to harm employment: "It's having a first-order effect right now. If the uncertainty is not resolved, around the world employment growth slows as well as investment."

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RBA Seen Cutting Rates Again as Lowe Keeps Cards Close to Chest. Lowe ’ s confidence in an uptick -- if only a moderate one -- is premised on the combination of his already delivered 50 basis points of easing, government tax rebates, infrastructure spending and higher mining investment

The RBA , which held the cash rate at the record low of 1 per cent on Tuesday, has called for the Morrison government to borrow at low interest rates and increase infrastructure spending to RBA governor Philip Lowe said the Morrison government needs to increase infrastructure spending .

On the other hand, an early resolution could lead to a quick turnaround in the world economy: "If uncertainty gets resolved, given that there's been under-investment in capital formation for a while and interest rates are low, the situation could pick up quite quickly. So the resolution of the uncertainty is the number one priority at the macro level."

Independent economist Saul Eslake said that the disagreement between the Reserve Bank and the government was set to continue: "It's barely quarter-time," he said.

He said that "there is already quite a lot of infrastructure going on, but the national accounts this week show that while infrastructure spending is at a high level, the rate of growth in that spending is diminishing".

He said there was a case for bringing forward state and federal projects planned to be built over the next 10 years.

The Master Builders Association agrees with the Reserve Bank. It said last week that "even though we supposed to be on the cusp of an infrastructure boom, engineering construction activity has not been this weak since the GFC.

"It’s a clear sign that governments are not moving fast enough to advance infrastructure commitments to the construction phase,” the association's economist Shane Garrett said.

The clashing opinions are part of a widening divergence between the Morrison government and the central bank over how to generate growth.

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