Reserve Bank of Australia Governor Philip Lowe called for an increase in infrastructure spending across the country, including railroads, bridges and roads, which is directly contrary to Prime Minister Morrison’s views.
Morrison said this week that the federal government “has almost reached the top of the number of infrastructure projects that can be carried out at the same time.” But in an interview with Sydney Morning Herald and The Times, Dr. Roy said, “I think we can do more.”
The data disclosed this week showed that the economy reached its weakest level in 10 years. In an appeal to increase infrastructure spending to stimulate the economy, Morrison said the government has done its best. This includes getting the states to advance the planned infrastructure projects.
However, Dr. Roy said that he can accommodate more space for infrastructure projects and can spend more on maintaining existing public infrastructure.
“There are currently limited capacity to make more large infrastructure projects in Sydney and Melbourne, but there are major projects in other parts of the country, as well as a series of smaller projects,” he said in an interview.
“Some of the infrastructure investment is actually used to maintain the country’s roads, rails and bridges. This helps not focus infrastructure investment on Sydney and Melbourne.”
The central bank governor also said that solving the Sino-US trade war is the “primary task” of the world economy.
“The trade war has affected the global investment climate. Because companies are uncertain about tariffs and do not know the future of the technology world, they are very anxious about investment.”
“Can you have Chinese elements in your factory? If the company is uncertain, they will wait and see.”
Roy said that such disputes may begin to hurt employment.
On the other hand, early resolution can quickly reverse the world economy. “If uncertainty is resolved, given the lack of capital investment for a period of time and the low interest rates, the situation may soon improve. So from a macro perspective, solving the uncertainty problem is a top priority.”
Independent economist Saul Eslake said that the different views between the government and the central bank will continue: “The quarter has not yet arrived,” he said.
He said that “there are already many infrastructure projects in progress, but although this week’s national tombs show that infrastructure spending is at a high level, spending growth is declining.”
He said that the state and federal infrastructure projects in the next decade will make sense in advance.
The Construction Industry Association agrees with the central bank’s point of view.
