Why the ‘puzzled’ RBA is eyeing another rate cut

The man who holds the nation’s purse strings is having trouble working out what’s causing Australia’s slowing economy.

Reserve Bank governor Phillip Lowe admits the slowdown over the past year has him puzzled.

He says the drought, slow wage growth and international factors are having an impact on consumer spending and business.

Those comments came amid a strong indication the Reserve Bank will further decrease record-low interest rates next month.

But Paul Bloxham, chief economist at HSBC, told 3AW Breakfast the RBA may soon look beyond rate cuts to make an impact.

“The RBA is getting close to their lower nominal bound … and they’ve said they’re not likely to ever take it negative,” he said.

“It means the RBA would have to look at other sets of tools.

“The RBA has said it would be better to get fiscal support – government spending – to support the economy.”

Click PLAY to hear Paul Bloxham explain global impacts on Australia’s economy