The Federal Chamber of Automotive Industries reported on Tuesday there were 71,731 new cars bought through January, the worst opening to a year since 2003. The chamber noted bushfires and international issues such as the coronavirus were likely reasons for the poor performance.
In an address to the National Press Club, Dr Lowe said low interest rates meant there was no excuse for business and governments not to borrow and invest in projects such as infrastructure, technology upgrades, education and training or energy systems.
He said governments and businesses should also invest in dealing with climate change, arguing it was already having a financial impact that would only grow.
“I think that we’re seeing climate change affect patterns of production and distribution and investment. We’re seeing the cost and availability of insurance change, which is going to affect where people invest,” he said.
“The fact that it is affecting the value of assets and can likely do that in the future means that there are financial stability implications over time. We’re likely to see at some point some stranded assets and the value falls.”
The Morrison government is aiming to deliver the nation’s first federal budget surplus since before the global financial crisis.
But Dr Lowe said there are more pressing budget policy challenges, including the way for fiscal and monetary policy to stabilise the economy given low interest rate settings.
“Whether or not the government has a small budget surplus from an economic perspective is not really that important,” he said.
Interest rates and the budget may be called in to help the economy with growing concerns about the impact of coronavirus.
ANZ’s economics team had initially expected the virus to lower growth by 0.2 percentage points in the March quarter, but now say it appeared the virus and the response to it across the world would likely take half a percentage point off growth through the first three months of this year.
Economists Felicity Emmett and David Plank said the tourism and education sectors would be hit hardest but there would be a broader impact across the country.
“Local consumer sentiment took a hit from the bushfires and the news regarding the virus is keeping confidence levels low,” they said.
“Rising uncertainty about the impact of the virus is likely to test business confidence, and there is the potential for investment plans to be delayed.”
They were backed by AMP Capital chief economist Shane Oliver who said GDP could be 0.2 percentage points lower this quarter, but growth would rebound in the June quarter.
The last time the Australian economy contracted in a quarter was in early 2011 when cyclones closed key ports across Queensland and Western Australia. The economy quickly rebound in the June quarter.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Matt Wade is a senior economics writer at The Sydney Morning Herald.