The Reserve Bank boss has given his backing to the prime minister’s post-COVID economic reform agenda, saying change is needed to help businesses expand, invest, innovate and hire people.
Philip Lowe said Scott Morrison’s speech to the National Press Club this week, which touched on tax and industrial relations reform, was a “helpful starting point”.
Dr Lowe told a Senate inquiry the economic downturn from coronavirus may not be as severe as first thought, because of better-than-expected health outcomes.
But although the economy was tracking well, there were many challenges ahead.
“It’s still a pretty depressing scenario,” Dr Lowe told the hearing.
He says a shadow will be cast over the economy as the recovery gets under way.
“And as a country, we’ll need to turn our minds as how to best move out of that shadow.”
Seven in 10 businesses have had a drop in revenue as a result of coronavirus, the Australian Bureau of Statistics reported on Thursday.
Meanwhile, almost three-quarters of businesses have used support measures as a result of COVID-19, including 55 per cent that have accessed wage subsidies.
Dr Lowe says depending on the next few months, the government’s JobKeeper wage subsidy program should perhaps continue.
It could be tapered and targeted for specific industries, he suggested.
Dr Lowe expects Australia’s cash rate to remain at its historic low of 0.25 per cent for some years.
The Reserve Bank won’t look to change the rate until progress is made towards full employment and inflation is within its two to three per cent target band.
Dr Lowe says more job losses are expected but it likely won’t be as bad as the figures from April, when nearly 600,000 jobs were lost.
He described that result as “shocking”, but short of what was predicted.
Australian Prudential Regulation Authority chair Wayne Byres says ongoing vigilance is needed to ensure the financial and operational resilience can be preserved over the long-term.
“Investments in financial resilience, risk management, cyber security and contingency planning, while never perfect, have stood up well thus far,” he said in his opening statement.
“But it is still early days, many more significant challenges remain ahead, and the resources of the industry are not limitless.”
CommSec senior economist Ryan Felsman said Dr Lowe comments were reassuring, but uncertainty would remain until a potential vaccine is found.