In his speech to the Armidale Business Chamber, Reserve Bank of Australia Governor, Philip Lowe, said that "we will all be better off if business have the confidence to expand, invest, innovate and hire people".
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Few would disagree with that statement. The problem facing the Governor though - and policy makers more generally - is that business confidence isn't just reliant on lower rates. A number of factors are important - like international headwinds and geopolitics, weak household disposable incomes and of course the drought. All of these weigh on confidence and create uncertainty about the future.
That's why it would be naive to assume that further interest rate cuts will restore business confidence, boost economic growth or lift employment. Recent interest rate reductions certainly don't appear to have had an impact on income levels, investment or confidence.
What we need more than just interest rate reductions, is structural reform. Structural reform, such as lower taxes, water security, equitable water policies, greater short-term infrastructure projects and affordable, reliable energy are far more important.
It is these kind of reforms that the NSW Business Chamber believes will support the economy during, not only these turbulent times, but also longer term by increasing the capacity of the economy, creating more jobs and delivering stronger regional communities.
There is no doubt improvements to transport, energy and communication networks are critical enablers of economic activity. Governor Lowe identified the delivery of new infrastructure in our cities and regions as one of the timeliest and effective measures to sustain economic activity, and promote business confidence.
So the pressure is on the state government to deliver infrastructure that will improve transport, provide reliable energy. They must also fulfil their election promise to spend snowy hydro and leasing asset proceeds in regional communities.
Their federal counterparts need to step up and undertake a thorough review of how we manage water in this country before our currently framed water plans irreparably damage our regional communities.
The real risk is that without reform, businesses will continue to delay making significant investments. At the end of the day, this is not a great thing for job creation either here or elsewhere in NSW.
