PM explaining, not heavying on rates: Wong

The prime minister is explaining why the government should produce a surplus, not heavying the Reserve Bank on rate cuts, Finance Minister Penny Wong says.

On Thursday, Prime Minister Julia Gillard said changes to the official cash rate ultimately lie in the hands of the independent central bank, but the government could put the right policy settings in place to it give room to move.

She told a business lunch in Perth the projected surplus was not a political target, but a “potent economic tool”.

“It’s time to get back in the black,” she told the Chamber of Minerals and Energy of Western Australia and Western Australian Chamber of Commerce and Industry.

A promised surplus would give the Reserve Bank of Australia room to make a cut to its cash rate if it considered it appropriate.

Senator Wong denied Ms Gillard was trying to “heavy” the central bank into cutting rates at its May 1 meeting, a week before the federal budget is handed down.

“What the prime minister is doing is explaining to Australians why it is a good thing for the government to ensure we bring the budget back to surplus,” she told ABC TV.

This was a “very sensible proposition” which the government was pursuing in the best interests of all Australians.

“If we have a situation where the Reserve has the capacity and the flexibility to move on rates, that is obviously a good thing in an economy is undergoing transition,” Senator Wong said.

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