RBA chief warns of pandemic shadow
The “shadow of the virus” will last for years and the record low interest rates are staying for the foreseeable future, Reserve Bank boss Philip Lowe has warned.
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THE “shadow of the virus” will last for years and the record low interest rates are staying for the foreseeable future, Reserve Bank boss Philip Lowe has warned.
But he played down the threat to the economy of “zombie firms”, companies that are being kept alive only by stimulus measures like JobKeeper and rent or mortgage holidays.
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Dr Lowe said Australia had been relatively successful in avoiding the worst of the health and economic outcomes from the virus and he was “fundamentally optimistic” about the future.
Despite this, he warned there would not be a sharp return to normal, even after the virus is beaten and vaccines developed.
“I think there is a shadow from this crisis that will last for perhaps years,” he told a forum at the ANU Crawford School of Public Policy.
“We can move out of that shadow slowly, or we can move out of it quickly.”
Advancing technology and reforms to tax, industrial relations and regulation, as well as an entrepreneurial spirit are what is needed to prevent the economy and jobs growth remaining sluggish for years to come, he said.
“People will be more risk averse, they won’t want to borrow, we’ll have lower population dynamics,” Dr Lowe said.
“Unless we change something, we’ll have a world of lower growth in Australia.”
The RBA governor said Australian society’s aversion to risk, which had predated the coronavirus, was more of a risk than “zombie firms”.
“I’m not worried that there are a whole bunch of zombies around the Australian economy that are consuming financial resources, workers, and scarce physical assets, preventing successful, dynamic companies from growing,” he said.
“Remember, those zombie firms, if they exist, are employing people, which is good.
“Society’s attitudes towards risk and entrepreneurship are what we should be focusing on.”
