Economy needs growth strategy: Frydenberg

PM Scott Morrison and Treasurer Josh Frydenberg met with RBA Governor Philip Lowe in Sydney.
PM Scott Morrison and Treasurer Josh Frydenberg met with RBA Governor Philip Lowe in Sydney.

Treasurer Josh Frydenberg is banking on a "pro-growth" strategy of income tax cuts and infrastructure spending to reinvigorate a stalling economy.

But Labor frontbencher Penny Wong is worried there's no plan to deal with "tepid" economic growth.

The Reserve Bank of Australia will consider cutting the rate at its board meeting in two weeks, in hopes of reducing unemployment and buoying inflation.

Mr Frydenberg encouraged bankers to continue to lend, telling a Stockbrokers and Financial Advisers Conference they were "absolutely critical" to the economy.

"I just came from a meeting with the Reserve Bank governor, with the prime minister, and Australia does face some headwinds," Mr Frydenberg told the conference in Sydney on Wednesday.

"Domestically we've seen some significant impacts from the floods and the drought. The housing market has slowed.

"It is not the time for higher taxes, it is time for a pro-growth strategy."

Scott Morrison has promised to make the flood and drought recovery an early priority for his re-elected government.

Mr Frydenberg is optimistic the economy would start moving again now the election has been decided and the coalition can implement its plan.

"That's about pro-growth, it's about more jobs, higher wages, and that's about our infrastructure plan, the tax relief, 80,000 new apprentices," Mr Frydenberg told reporters.

Senator Wong said the coalition needed to do more.

"We've had very tepid economic growth in recent times and some of the signs aren't good," she told reporters in Adelaide.

"My greater fear is that it doesn't appear this government has any plan ... to deal with an economy that is not as strong as we would want it to be."

The coalition is planning income tax cuts in the short and long term, although Mr Morrison concedes it is unlikely he will get them through before June 30.

Unemployment edged up to 5.2 per cent in April, while inflation was zero in the March quarter and 1.3 per cent over the previous 12 months.

That's below the RBA's target of between two and three per cent on average.

The cash rate has been at a record low of 1.5 per cent since August 2016, leading to suggestions it could drop again.

"A lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target," RBA Governor Philip Lowe said in a speech to the Economic Society of Australia on Tuesday.

Dr Lowe said easing monetary policy and more infrastructure spending could help meet unemployment and inflation targets.

Mr Frydenberg said the coalition was spending $100 billion over 10 years on infrastructure.

He also praised the Australian Prudential Regulation Authority for easing lending standards to open up more capital in the housing market.

Australian Associated Press