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‘They’re a little bit concerned’: RBA governor urges Senate crossbench to pass tax cuts

“They only have another five goes and then they are down to 0 [per cent],” said Centre Alliance senator Rex Patrick, who asked for the briefing from Dr Lowe.

“It is clear that they are a little bit concerned about the economy because they have just reduced interest rates. It is fair to say that the Governor was supportive of the tax cuts.”

Economists believe the first stage of the government’s 10-year package, a $1080 boost for average workers in their tax returns, would deliver the same effect as a 50 basis point cut in interest rates.

One Nation's Pauline Hanson and Centre Alliance's Rex Patrick are negotiating with the government over its three-stage tax package.

One Nation’s Pauline Hanson and Centre Alliance’s Rex Patrick are negotiating with the government over its three-stage tax package.Credit:Alex Ellinghausen

Finance Minister Mathias Cormann is now locked in negotiations with Centre Alliance and One Nation to secure the votes the government needs to pass the three-stage, 10-year package without Labor. Labor has so far refused to back the third stage of the package, which would see an $11,000 tax cut for workers earning over $200,000 a year in 2024.

In exchange for their support, Centre Alliance has given the government three weeks to deliver a plan to ensure that tax cuts are not swallowed up by rising power bills. One Nation has asked for taxpayer funding to support a new coal-fired power plant.

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Senator Patrick said Dr Lowe’s “very considered and informed opinion” was just one upon which he was relying to make up his mind.

“It is just like sitting down with the Australian Council of Social Service or any of the other groups that can tell you tax cuts are bad,” he said. “They are all different things we have to weigh up.”

The warnings from the Reserve Bank come as a key survey of the business sector shows that despite a post-election lift in confidence trading conditions have since dropped off.

The closely-watched NAB monthly survey showed a seven point spike in confidence with much of that recorded after the May 18 poll.

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But the survey showed conditions fell to sit at their lowest level since September 2014 with a drop in forward orders a key concern. Capacity utilisation – how much a business is using its resources – is now below its long-term average as are trading conditions in NSW and Victoria.

The mining sector is still the strongest but the retail sector, one of the nation’s biggest employers, fell to its lowest level since March 2001 at a time when the global economy suffered a minor recession.

ANZ’s head of Australian economics, David Plank, said the survey was suggesting the business sector was facing a tough period.

“Business confidence was up quite strongly in May, most likely reflecting a post-election bounce. But this gain wasn’t reflected in what businesses were actually experiencing,” he said.

Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.

Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.

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