There are a lot of benefits to cutting interest rates. However, if it encourages manufacturers to borrow in order to increase productivity in the hope of edging out competitors or cutting jobs, it could worsen the whole situation by reducing consumer demand.
Household debt is already dangerously high.
The graph shows that for the first time total household debt is now higher than income. Many people are mortgaging their homes to pay off their credit cards. It risky to encourage consumers to borrow more so that they can buy the country out of a recession. In this chart, all taxpayers are divided by income into five groups of equal size. The size of each section of the pie shows the percentage of the whole tax cut going to a particular group.