Australia’s first interest rate cut in February may ease consumer costs, but it won’t solve the underlying economic issues, according to fresh ANZ insights.
“This fiscal shift also reflects the emergence of four powerful and resource-intensive secular trends: decarbonisation, deglobalisation, defence, and dwelling deficiency,” said Richard Yetsenga (pictured above), ANZ chief economist.
The four “Ds” are shaping economic policy worldwide.
Decarbonisation is expanding, with climate projects dominating infrastructure pipelines.
Deglobalisation accelerates through industrial policies, as countries focus on reshoring supply chains.
Global defence spending is rising, driven by geopolitical challenges, while housing remains increasingly unaffordable.
Dwellings are becoming scarcer as limited resources are diverted to other sectors. With 84% of global housing markets rated as unaffordable, boosting supply is no easy task.
“Demographics and democracy are also complicating supply,” Yetsenga said, adding that an aging population is further straining economies.
Although interest rate cuts will ease debt burdens, they could further intensify resource competition, heightening the need for policy prioritisation, Yetsenga said.
Governments face increasing difficulty maintaining power, shifting focus from ideological divides to incumbency challenges, complicating consistent long-term strategies.
Lower interest rates will provide short-term relief but won’t address the productivity gap.
“The road to future prosperity is paved with better productivity, not rate cuts,” Yetsenga said.
Stronger productivity will reduce the need for resource prioritisation, offering a more sustainable path forward.
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