Prime Minister Malcolm Turnbull wants to see more investment to boost economic growth, urging business to take advantage of low interest rates.
As widely tipped, the Reserve Bank kept the cash rate at a record low of two per cent at Tuesday’s monthly board meeting.
Mr Turnbull said while the economy faced a lot of headwinds, it was in good shape with a low interest rate environment good for investment.
“There should be more investment, that is why confidence is so important,” he said before the RBA decision.
The latest ANZ-Roy Morgan consumer confidence gauge slipped for the second week in a row, and is now almost halving the record bounce that was posted in response to Mr Turnbull toppling Tony Abbott for the Liberal leadership in September.
ANZ co-head of Australian Economics Felicity Emmett says Mr Turnbull faces an uphill battle to resurrect confidence in the economy at a time when global financial market volatility and early signs of a softening housing market are adding to the existing woes of the household sector.
That includes weak income growth and high household debt.
“Hence, confidence is likely to remain under pressure over the coming months,” she says.
Monthly international trade figures also reported a larger-than-expected deficit in August.
But National Australia Bank senor economist David de Garis says the trade performance so far during the September quarter has been better than the previous three months.
NAB’s modelling anticipates September quarter growth of 0.6 per cent and predicated on exports contributing 0.6 percentage points after the detraction in the June quarter.
“That expectation looks broadly on track,” Mr de Garis said.
Mr Turnbull insists the economy must grow faster than the growth in government expenses if the budget is to be brought back into balance.
Under the new stewardship of Mr Turnbull and Treasurer Scott Morrison the government faces a mammoth task if it is to return a surplus in 2019/20 as predicted by former treasurer Joe Hockey.
“If your economy is growing faster than your expenses over time that deficit will shrink,” Mr Turnbull said.
He also hinted there could be tax changes in the May budget, saying the government does not want to increase the already high level of taxation.
“We will certainly be taking decisions in the lead-up to the budget and obviously if we have major tax reforms we will take them to the next election,” he said.