Former Central Bank of Australia board member calls for pause in rate cuts due to fiscal spending

According to Warwick McKibbin, a former member of the Reserve Bank of Australia (RBA) Board, the interest rate should be left unchanged during the regulator's meeting next week. He attributes this to the government's spending on fiscal stimulus amid a neutral monetary policy environment.

McKibbin, who served as a member of the RBA board from 2001 to 2011, pointed to Australia's strong labor market and inflation figures remaining just below the central bank's target levels. In such conditions, especially given the uncertainty in global trade created by the actions of the new US administration, a wait-and-see approach and a pause in rate cuts would be a reasonable step, the expert said.

McKibbin's point of view contradicts the general consensus: most economists and traders expect the RBA to cut the key rate to 3.85% on Tuesday. According to Bloomberg, money market participants also predict two more rate cuts by the regulator this year.

Earlier, S&P Global Ratings warned of risks for Australia's credit rating in case of growth of structural deficit, government debt, and interest expenses, which are expected as a result of election promises of politicians.