THE phrase, "never waste a good crisis", springs readily to mind when assessing calls for help to get business through the economic - rather than physical - threats of the COVID-19 coronavirus.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
With financial markets having already "priced in" such a cut, the Reserve Bank of Australia yesterday reset official interest rates to a new record low of 0.5 per cent.
Reserve bank governor Philip Lowe said the 0.25 percentage point reduction was taken "to support the economy" against the impact of the virus, which was particularly noticeable in the "education and travel sectors".
Rates had been kept steady at 1.5 per cent from August 2016 to May last year, when the first of four reductions was delivered.
Having held its nerve for almost three years, the reserve is now aligned with a global narrative that insists that cheaper money will eventually restore the economic growth that has eluded developed economies since the Global Financial Crisis of 2007-08.
READ MORE:
Despite the debt concerns that triggered the GFC, the result was a US-led slashing of interest rates to supposedly short-term "crisis" levels.
Today, the debt burden is even greater, "crisis" settings have become the norm, and economic growth is as elusive as ever, despite the promises of economists.
It can be argued, too, that the main financial damage by the coronavirus is not to demand: it's a supply-side problem.
China - often dubbed "the world's factory" - has had to shut down many of its industries.
Even if the virus disappeared tomorrow, it would take weeks or months to restart supply lines and resume the trade that drives our globally interconnected economy.
On this basis, cheaper money in Australia is unlikely to ease such "real world" trade issues.
What it will do, however, is pour more fuel on a once-again-rising housing market, and put the return to nominally "balanced" interest rates even further out of reach.
The federal government has also signalled a "modest" stimulus package in this year's budget, another example of business having its concerns met, more or less for the asking.
It's true that employees need employers.
And a rising tide will floats all boats, as the saying goes.
But such arguments are unlikely to carry much weight with self-funded retirees forced into ever riskier investments by insufficient bank interest rates, or for the unemployed having to get by on an increasingly stingy Newstart allowance: problems that were evident long before COVID-19.
ISSUE: 39,544.
While you're with us, did you know the Newcastle Herald offers breaking news alerts, daily email newsletters and more? Keep up to date with all the local news - sign up here
