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Economist says fiscal policy answer if RBA cuts fail to stimulate economy

HSBC Australia’s Chief Economist says if government tax cuts and interest rate cuts fail to stimulate the economy the government should turn to fiscal policy.

In a meeting with the Treasurer today, Reserve Bank Governor Philip Lowe endorsed the government’s economic plan, agreeing the economy is growing and the fundamentals “are strong’’.

HSBC Australia Chief Economist Paul Bloxham tells Ross Greenwood the RBA can’t keep cutting interest rates if the economy falters.

“Another two cuts and we’re sort of done on the RBA’s conventional instrument.

“I think fiscal policy should play a much bigger role, it makes a lot more sense in a world of extremely low-interest rates.

“The fiscal authorities have a lot of room to move, a lot more room than you think because interest rates are so phenomenally low.”

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