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Low rates should mean more investment: PM


interest_rate_2Low interest rates should be encouraging a greater amount of investment, Prime Minister Malcolm Turnbull believes.

The Reserve Bank on Tuesday is widely tipped to keep the cash rate at a record low of two per cent amid a slowing global economy and volatile financial markets.

While Australia faces a lot of headwinds, Mr Turnbull says the economy is in good shape with a low interest rate environment good for investment.

"There should be more investment, that is why confidence is so important," he told 3AW radio.
The latest ANZ-Roy Morgan consumer confidence gauge slipped for the second week in a row, and is now almost halving the record bounce that was posted in response to Mr Turnbull toppling Tony Abbott for the Liberal leadership in September.

ANZ co-head of Australian Economics Felicity Emmett says Mr Turnbull faces an uphill battle to resurrect confidence in the economy at a time when global financial market volatility and early signs of a softening housing market are adding to the existing woes of the household sector.

That includes weak income growth and high household debt.

"Hence, confidence is likely to remain under pressure over the coming months," she says.

But Mr Turnbull insists the economy must grow faster than the growth in government expenses if the budget is to be brought back into balance.

Under the new stewardship of Mr Turnbull and Treasurer Scott Morrison the government faces a mammoth task if it is return a surplus in 2019/20 as predicted by former treasurer Joe Hockey.

"If your economy is growing faster then your expenses over time that deficit will shrink," Mr Turnbull said.

He also hinted there could be tax changes in the May budget, saying the government does not want to increase the already high level of taxation.

"We will certainly be taking decisions in the lead-up to the budget, and obviously if we have major tax reforms we will take them to the next election," he said.


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