SYDNEY (Reuters) – Surprisingly retained by Australians in a national election over the weekend, Prime Minister Scott Morrison’s centre-right government now needs to find a fast way out of a worrying slowdown in an economy that has been recession-free since 1991.
The Reserve Bank of Australia (RBA) is expected to cut interest rates, already at record lows, later in the year, but economists say Morrison should be administering some fiscal stimulus in the coming months, rather than remain fixated on delivering Australia’s first budget surplus in a decade.
“If they really are hell bent on delivering a surplus, the Australian economy and its people will suffer,” said Frank Stilwell, an emeritus professor and Keynesian economist at the University of Sydney.
“They can’t deliver tax cuts and budget surpluses in a stagnant and possibly declining economy,” Stillwell said, describing the campaign pledges as false promises.
The housing market is suffering its worst downturn in a generation and wages growth is anaemic, leading households to sharply cut back on spending.
During the election campaign, Morrison trumpeted the record pace of job creation, and the help that planned tax cuts would provide for millions of indebted households, all to be accomplished while his Liberal-National coalition government brought the budget back toward a surplus.
Financial markets celebrated an election result that confounded opinion polls, finding “relief from the elimination of the threat of Labor’s less business-friendly policies,” according to Eleanor Creagh, economist at Saxo Bank.