US Treasury's Mnuchin promises 3 per cent growth by end-2018
WASHINGTON: US Treasury Secretary Steven Mnuchin said Thursday tax cuts and reduced regulations, including on banks, will boost economic growth to three percent by the end of next year.
"I think it's very achievable. If you look at long-term growth, we have underperformed where we need to be," Mnuchin said in an interview on CNBC.
"We believe we can be competitive and get back to sustainable growth at three percent or more."
His comments marked a step back from President Donald Trump campaign promise of four percent growth, a target widely regarded as unrealistic.
Mnuchin said the key to boosting growth would be tax reform and "regulatory relief," including reducing the burden of Dodd-Frank banking regulations implemented in the wake of the 2008 global financial crisis.
"We need to cut back regulations that have prevented small- and medium-sized businesses from being the engine of growth in this country," he said, adding that officials also are focused on "Dodd-Frank and making sure banks can lend."
Trump's administration is committed to getting a tax package passed in Congress by August, but the impact will likely not be seen before late 2018.
"Regardless of when they go in place, this won't really impact the economy until next year when you begin to see changes in behavior. And it will take a couple years to get growth."
Mnuchin acknowledged that the administration's growth estimates likely will be higher than what Congress uses to score the tax plan.
The US economy expanded by 1.6 percent in 2016 and 2.6 percent in 2015. The International Monetary Fund last month projected growth of 1.9 percent this year and two percent in 2018, but said the outlook could change based on the tax and spending policies being discussed.
Mnuchin agreed that the very low US interest rates may have to rise as economic growth picks up, noting that the US Federal Reserve has signaled that possibility.
He said it would make sense for the government to consider issuing ultra-long-term bonds of up to 100 years maturity to take advantage of the low borrowing costs.
"I think it's something that we should seriously look at," he said, adding that he has already begun to talk to the Treasury staff about the possibility, and will discuss the idea with investors and market participants to gauge interest.
The longest maturity bond the US Treasury currently issues is 30 years.
Mnuchin would not commit to taking action against China, as President Donald Trump repeatedly has threatened to do, over past currency manipulation to gain a trade advantage.
"Currencies are one of the things we look at, and that's something I've talked to a lot of my counterparts about," he said.
"We have a process within Treasury where we go through and look at currency manipulation across the board."
"We're not making any judgments until we continue that process," he added.
Treasury produces a semi-annual report to Congress on the currency policies of trading partners.
Naming China a "currency manipulator," which the last two administration's resisted doing to avoid upsetting trade relations, would initiate a process that could end in retaliatory trade measures.