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Australia's ruling parties are terrified of losing the country's AAA credit score that they refuse to accommodate further stimulus in order to boost growth and hiring. Reserve Bank of Australia Governor Philip Lowe is concerned that additional interest-rate reductions might prompt further borrowing from households that already carry record debts and place the nation's financial system at risk.
According to Veteran Westpac Banking Corp. economist, Bill Evans, the solution for breaking the deadlock would be a rating downgrade since they would be more open to adopting a reasonable long-term infrastructure program which would boost productivity. Australia's labor market is growing soft, with employers choosing to hire part-time instead of full-time workers and participation slumps. Government data has shown that profits of firms have gained only one percent in the last quarter. This suggests that the economy needs help.
The Organization for Economic Cooperation and Development and the International Monetary Fund have pressed for Australia's authorities to spend more on infrastructure. The government claims that it needs to return the budget back to surplus before borrowing for investment.
