Interest rates are expected to remain at record-low levels for at least three years, Australia's leaders have been told.
Interest rates are expected to remain at record-low levels for at least three years, Australia's leaders have been told.
Reserve Bank governor Philip Lowe told a meeting of the national cabinet today that the cash rate, which is at 0.25 per cent, could be expected to remain at that level for "at least three years if not more", Prime Minister Scott Morrison told reporters.
He said Dr Lowe had also told the meeting that financial markets were performing well.
Mr Morrison said the biggest economic challenge facing the country was unemployment, which was expected to remain at more than seven per cent for the next two years.
"Jobs is the number one economic issue," Mr Morrison said.
To address this, the federal and state governments would focus on three areas: income support, infrastructure and red tape reduction for business.
The prime minister said the RBA governor had told national cabinet the states should lift their fiscal investment over the next two years "to the tune of two per cent of GDP or $40 billion over the next two years".
The states and territories are pumping $48 billion, or 2.4 per cent of GDP, into major projects.
"This needs to be done in a co-ordinated way ... in a careful and purposeful way," Mr Morrison said.
Dr Lowe told the meeting the debt required to fund the $40 billion in new spending could be absorbed by the states and territories.
Mr Morrison said he wanted to see some of the spending done in regional areas, alongside local governments.
Meanwhile, retail sales rose 3.3 per cent in July, lifting 12.2 per cent over the year despite the impact of the Victorian lockdown.
The preliminary figures released by the Australian Bureau of Statistics showed the largest chunk of the rise occurring in sales of furniture and white goods.
There has also been a strong rise in food retailing, driven in part by coronavirus stockpiling in Victoria.
Ben Udy, from Capital Economics, said while retail sales were likely to show a fall in August the latest figures showed consumers were taking the second virus wave in their stride.
"While many forecasters expect a stagnation in third quarter GDP or even a further fall, we expect GDP growth to turn positive," Mr Udy said.
Border closures on national cabinet agenda
Today's news comes after state premiers came under pressure this afternoon to break border deadlocks, with businesses warning they were reaching boiling point.
Scott Morrison plead with premiers and chief ministers to lift the restrictions when national cabinet met today.
Previously, Home Affairs Minister Peter Dutton was concerned for tourism operators and people in border communities cut off from health care.
"Lives are really being disrupted and you've got to ask why when the medical advice is not saying that is what is needed," Mr Dutton told the Nine Network.
"If we've got premiers who are pursuing an elimination process, the country will go broke."
Victoria recorded 179 new coronavirus cases on Friday, the first time the daily total has fallen below 200 in weeks.
The state also recorded another nine deaths, taking the national toll to 472.
All other states and territories have fairly negligible infection numbers, or none at all.
Queensland's border closures alone are estimated to cost $21 million and 173 jobs a day.
Qantas boss Alan Joyce says it is confusing why states with no cases are not open to each other.
Federal Agriculture Minister David Littleproud, who hails from rural Queensland, has poured oil on the debate.
"The inability or unwillingness of our premiers to work with each other to find common-sense and practical solutions to restrictions they have imposed is becoming a major test of their leadership," Mr Littleproud said.
"Premiers must remember that they are not just premiers of capital cities.
"I urge each of them to visit their impacted border regions as soon as possible and thrash out workable solutions with local governments, people, businesses and organisations."
He described the meeting as a "flashpoint for our federation".
"Unless premiers commit to work with one another to find workable solutions to state border issues for regional Australians, then they risk states becoming irrelevant to modern Australia."
Businesses and farm groups have queried border restrictions on large parts of Queensland, NSW, Victoria and South Australia that have no coronavirus cases.
There are also concerns about the inflexibility of rules preventing people who live near borders from accessing interstate health services.
The tourism and transport sectors want greater certainty about when to expect an easing of travel restrictions.
Mr Morrison wrote to state leaders on August 16 urging them to resolve problems, and has been working with individual premiers on specific solutions.
Aged care response plans for each state, working with the federal government, will also be on the national cabinet agenda.
There is also expected to be discussion about securing seasonal workers to pick fruit and vegetables.
