The recent rate cut decisions have sought to strike a prudent balance to help encourage consumption growth and thus investment without creating any imbalances, Reserve Bank of Australia Deputy Governor Philip Lowe said Monday.
“So, there is a fairly fine line to tread here,” he said at the Corporate Finance Forum.
“It is, however, unlikely to be in Australia’s long-term interests to engineer a consumption boom by encouraging people to borrow large amounts against future income,” said Lowe.
This is especially so when debt levels are already high and prospects for future income growth are not as positive as they once were, he observed.
Lowe noted that the transition in the Australian economy and low returns to savers – is an improvement in the underlying investment environment.
“Unfortunately, there is no magic lever here, but the good news is that the task is not an impossible one,” he added.
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