RBA Governor urges Government to borrow and spend

Font Size:

Departing Reserve Bank of Australia (RBA) Governor Glenn Stevens used his farewell speech to implore Prime Minister Malcolm Turnbull to borrow and spend to dial up growth.

Mr Stevens believes the nation is in denial over the need for stronger decisions on budget repair and that the Government should take greater responsibility for spurring on economic demand through infrastructure investment.

Mr Stevens believes we can no longer rely on interest rate cuts alone to dial up economic growth and that while cuts still had some effect, they worked by encouraging private borrowers to borrow more.

“In Australia, gross public debt, for all levels of government, adds up to about 40 per cent of GDP. We are rightly concerned about the future trajectory of this ratio. But gross household debt is three times larger – about 125 per cent of GDP. That is not unmanageable – but nor is it a low number. It’s an interesting question which sector would have the greater capacity to take on more debt, in the event that we were to need a big demand stimulus,” said Mr Stevens.

Mr Stevens has held the job as Governor of the RBA for more than a decade and, in the last few years, has declared that Canberra needs to wake up to the challenges facing the nation.

“The case for governments being prepared to borrow for the right investment assets – long-lived assets that yield an economic return – does not extend to borrowing to pay pensions, welfare and routine government expenses, other than under the most exceptional circumstances,” he said.

Read more at www.rba.gov.au
Read more at www.afr.com
Read more at www.smh.com.au

Opinion: Invest in our future

The level of debt held by Government in Australia is always strongly debated in the lead up to Federal elections, with both sides of politics promising to tackle debt levels. I was pleased to see the departing RBA governor yesterday offering a different opinion on debt in his farewell speech.

For the average Australian, taking on a massive home loan debt is seen as move towards securing their financial future. With international lending rates currently so low, it makes sense for the Government to take a similar approach; borrowing more to invest in the assets that will set Australia up for decades of growth.

Previous governments have come out in support of Australian innovation and told small, medium and large businesses to back themselves to succeed. It’s now time for the Australian Government to do the same by preparing to borrow and invest in long-lived assets that will yield an economic return.

What do you think? Should Australia make strategic investments over the next decade with the specific goal of increasing economic growth? Or should we focus on reducing Government debt to $0?

RELATED LINKS

The dangers of not understanding investment risks

Noel Whittaker illustrates the dangers of not understanding investment risks.

Retirement: learn how to make more of your investments

Are you keen to learn more about your investment strategy?

Written by Drew

Starting out as a week of work experience in 2005 while studying his Bachelor of Business at Swinburne University, Drew has never left his post and has been with the company ever since, working on the websites digital needs. Drew has a passion for all things technology which is only rivalled for his love of all things sport (watching, not playing).
Contact:
LinkedIn
Email



SPONSORED LINKS

Sign-up to the YourLifeChoices Enewsletter

continue reading

Seniors Finance

Be a savvier saver with these nine tips

Many people have seen their savings pots wiped out by the impact of the pandemic. At the other end of...

Finance News

Big four banks dragged to court over credit 'rort'

Screaming, dressed in glistening armour and wielding an axe, Aaron Flores has defended the honour of Australia on the battlefield....

Health news

Public toilets are a disease risk

The COVID-19 pandemic has forced more people than ever to consider the potential for airborne particles to damage their health,...

Stylewatch

Kurt Russell and Goldie Hawn's best style moments

They're one of Hollywood's most enduring - and beloved - celebrity couples. Kurt Russell and Goldie Hawn started dating on...

Superannuation News

Super fund recovery steps up pace

Long-term trends such as the digitisation or economies and work automation, which have been sped up by the COVID-19 pandemic,...

Finance News

Financial advisers lobby for permanent reduction in regulation

The financial services sector wants consumer protection laws watered down, claiming they are pushing the cost of financial advice beyond...

Legal & General

Is there a safe way to block estranged child from will?

Can Angie block an estranged daughter from her will without consigning her other children to a drawn-out challenge after her...

Health

How to stop gas pain

Flatulence, commonly referred to as 'farting', is caused by gas in the bowel. Ordinarily, the intestines produce between 500 and...

LOADING MORE ARTICLE...