Fiscal policy needs to up the ante - ANZ

ANZ analysts believe governments across the globe need to play a bigger role in supporting economic growth by loosening their purse strings. 

Key quotes

Recent easing by global central banks is putting a floor under the slowdown, which alongside a more conciliatory tone between the US and China is a welcome development. 

The hurdle for further easing isn’t high, but with many central banks running low on ammo, it could be time for fiscal policy to up the ante.

The global economy is expected to rebound in 2020, courtesy of aggressive monetary policy easing last year and thawing US-China trade tensions. The Federal Reserve delivered three 25 basis point rate cuts in the second half of 2020 and recently cited persistently high inflation as a prerequisite for rate hikes. 

Both BOJ and the ECB are already running negative interest rate policies, while rates are closing to zero lower bound in Australia and New Zealand. So, there is limited room for further monetary stimulus.