RBA board member warns against major spending cuts

A RESERVE Bank board member has warned the federal government against "cutting spending dramatically or increasing taxes dramatically" as the economy was growing below trend, the AFR reports.

RBA board member John Edwards said in response to reports that the federal government was set to announce a pre-election budget statement that would see further cuts to cope with revenue downgrades, The Australian Financial Review writes.

"The stance of fiscal policy is always a consideration for monetary policy," Dr Edwards said. "We're talking about an economy in which growth is below trend, and on the most recent numbers, employment is not very strong."

"So these are the wrong circumstances in which to be, in my view, cutting spending dramatically or increasing taxes dramatically.

"I would have thought [cuts of] something like 0.4 per cent of gross domestic product would be about the perimeter of what would be sensible."

Read more at Brisbanetimes.com.au