Josh Frydenberg: We’ll stay the course in face of IMF downgrade

Josh Frydenberg says the government will maintain responsible economic management in the face of a downgrade from the IMF.

Treasurer Josh Frydenberg at a press conference at Parliament House in Canberra.

Josh Frydenberg has declared the Morrison government will “stay the course” in the face of an economic downgrade from the International Monetary Fund and global headwinds, insisting he doesn’t have to choose between growth and a surplus.

As Labor strengthened its push for the government to do more to stimulate the economy, former treasurer Peter Costello said there were diminishing returns in cutting interest rates much further. “I just don’t think there’s much stimulation left in monetary policy,” he said in Sydney on Wednesday.

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The Treasurer said the Coalition would support new policies and programs but refused to indicate what those new measures would be, other than to say the government would consider bringing forward infrastructure projects on a case-by-case basis.

“The global headwinds are real, and you’ve seen that in the IMF report today and their description of a synchronised slowdown. You’ve seen the impact of the drought, which has not only taken 0.25 per cent straight off GDP, but has seen significant funding being required from the federal government. So we do face these challenges,” Mr Frydenberg said.

“We’ll continue to provide support for new programs and policies but the point is that we will continue to maintain considered, disciplined, responsible economic management.”

Under pressure over the economic outlook, Mr Frydenberg lashed his Labor counterpart Jim Chalmers for pointing out the IMF downgrade to Australian growth was bigger than that for Greece.

“This was pathetic, reckless, shameful from a Labor Party which has shown that it has no ability to balance the budget. Greece has an unemployment rate of 20 per cent. Greece has a debt-to-GDP ratio of around 200 per cent. In fact, the Greek economy is 23 per cent smaller since the GFC, whereas the Australian economy is 33 per cent greater since the GFC,” Mr Frydenberg said.

“Australia is not immune from these global economic headwinds. That is why it is now more important than ever that we stay the course with considered, disciplined and responsible economic management. Economic management that sees Australia in its 29th consecutive year of economic growth.”

Anthony Albanese strengthened his push for Scott Morrison to commit to more stimulus following the IMF’s downgraded growth outlook, drawing a parallel with the Rudd government’s response to the global financial crisis.

Speaking on Sky News, Mr Albanese invoked the advice of former treasury secretary Ken Henry who advised the then Labor government to “go early, go hard, go households” to help insulate the economy from the full impact of the GFC.

He argued that the government was “in a state of drift” and responding too slowly to economic warnings signs. “Monetary policy can’t do all the heavy lifting,” he said. “The government has to bring forward economic stimulus.”

“Underemployment is at record levels. People are saying they want more hours ... We have productivity going backwards. We have interest rates at 0.75 per cent — under one per cent. And the Reserve Bank minutes show that they are looking at another decrease very soon.

“We have consumption that is through the floor. We have household debt at record levels. We have wages that aren’t increasing. We have energy prices putting pressure on households.”

Mr Albanese argued it was like the government was “an opposition in exile sitting on the government benches, still talking about Labor.”

Speaking at a forum in Sydney, Mr Costello questioned the value of further interest rate cuts.

“What will a rate cut do for the economy? In my view, not much,” Mr Costello said.

“All these people that are holding off spending or borrowing or investing, do they say, ‘I wouldn’t have done it at 1 per cent, but I am going out there now that it is 0.75 per cent’? I don’t think so.

“I believe that monetary policy is now, it’s run its race. Whether the cash rate is 0.75 per cent, whether it’s 0.5 per cent, whether it goes lower than that, I just don’t think there’s much stimulation left in monetary policy.”

The Reserve Bank of Australia has cut interest rates three times since the May election, down to a record low of 0.75 per cent.

Mr Frydenberg insisted the government’s plan for lower taxes, record spending on infrastructure, more apprenticeships, cutting red tape and new free trade agreements would ensure a strong economy and budget position.

Asked if the government was prepared to accept growth rates below 2 per cent, Mr Frydenberg said he would have to wait until the September national account numbers are delivered.