Frydenberg’s steady hand on economic tiller

Josh Frydenberg has insisted he will “stay the course’’ on the budget surplus.

Treasurer Josh Frydenberg holding a press conference at Parliament House in Canberra. Picture: Kym Smith

Josh Frydenberg has insisted he will “stay the course’’ on the budget surplus as he returned from a meeting of international finance ministers that warned of “elevated downside risks’’ to world growth and called on governments to employ all appropriate policy tools.

The Treasurer dismissed Labor demands for the government to unleash a wave of stimulus spending, saying the current economic slowdown was nothing like the global financial crisis.

The International Monetary Fund, wrapping up its spring meetings in Washington DC, issued a closing statement that said “available fiscal space should be used to support demand as needed’’. It also warned that trade tensions policy uncertainty and geopolitical risks were drags on global growth, which had been downgraded to 3 per cent this year, and declared “the pace has continued to weaken since April’’.

IMF managing director Kristalina Georgieva estimated the tariffs already imposed or threatened could shave 0.8 per cent off global growth by the end of next year. Much of that stemmed from declining business confidence.

However, the Treasurer, writing in The Australian today, says the Australian economy continues to perform “comparatively well”, and he will not “squander” the surplus. “It’s time to stay the course not engage in kneejerk spending,” he writes.

The government argues tax cuts already delivered and three interest rate cuts since the May federal election are already providing stimulus to the Australian economy and is urging an agenda to boost productivity.

Mr Frydenberg met G20 fin­ance ministers and central bank governors in Washington at the weekend. He said the mood was “serious but not panicked” as the world charted a course to deal with simultaneously low inflation, low unemployment and low interest rates.

An IMF report prepared for the meeting warned of a synchronised global slowdown, dragging world economic growth to its weakest pace since the GFC in 2008-09. The report slashed growth forecasts for Australia from 2.1 per cent to 1.7 per cent — well below the government’s 2.25 per cent forecast.

The Treasurer said the US-China trade war continued to hang over the global economy “like a dark cloud”, warning the imposition of tariffs on $700bn worth of goods had sapped global confidence and investment.

He said Australia’s historically low 0.75 per cent cash rate was “far from unique”, and conditions were nowhere near the point at which the government would consider digging into the surplus to stimulate the economy.

“It’s not the global financial crisis or anything like it,” Mr Frydenberg said. “What the economy requires is not pink batts, cash for clunkers and cheques to dead people that Labor became notorious for, but rather a laser-like focus on the productivity agenda. It is reforms on the supply side that will provide the uptick required to economic growth.”

Anthony Albanese last week urged the government to heed the advice of former Treasury secretary Ken Henry to “go hard, go early, go households”, which led to Kevin Rudd’s cash stimulus during the GFC. “This government is going slowly, going soft and going nowhere when it comes to an economic plan,” the Opposition Leader said.

Mr Frydenberg said Labor’s language of the GFC exposed the party as “panic merchants and economic neophytes”. “Surpluses are hard to achieve, otherwise every government before us would have got there,” he said.