Roundup: Australia embarking on "next chapter" after mining boom
0 Comment(s)
Print
E-mail Xinhua, September 21, 2017
SYDNEY, Sept. 21 (Xinhua) -- The governor of the Reserve Bank of Australia (RBA) said Australia was moving into "the next chapter" of its economic development in a speech on Thursday, where he outlined key factors that the RBA believes will shape the financial security of the nation.
The current chapter, according to Philip Lowe, was the mining boom that Australia experienced in the mid-to-late 2000's, combined with the "troubled global economy" during the same period, in which Lowe cited Australia's performance as being "reasonably successful" when compared to other advanced economies.
"Australia is one of the few advanced economies that avoided a recession in 2008. And the biggest mining boom in a century did not end in a crash, as previous booms did. Our interest rates remained positive, unlike those in many other advanced economies," Lowe said in a speech in Perth on Thursday.
"Since the mid 2000's, the unemployment rate has averaged 5.25 percent, a better outcome than in the previous three decades. Inflation has averaged 2.5 percent. And over this period, GDP growth has averaged 2.75 percent, higher than in most other advanced economies."
But the head of Australia's central bank did signal some challenges that are currently facing the Australian economy, with one of those being the lack of real wages growth in Australia, which has fallen to its lowest levels since the mid 1960's.
"This is partly a consequence of the unwinding of the mining boom but there are structural factors at work as well. The slow growth in wages is putting a strain on household budgets and contributing to low rates of inflation," Lowe said.
This lack of wages growth could prove to be damaging for the Australian economy in the event of any significant interest rate hikes - with many economists now tipping that the RBA is set to increase the cash rate by 2018 - and Paul Dales, chief economist at Capital Economics told Xinhua on Thursday that the RBA needs to adopt a conservative approach if it does indeed plan on lifting rates.
"If they raise it once or twice - so let's say 0.5 percent in total - then that probably won't make much difference to households," Dales said.
"But, if they raise rates by 100 basis points within a year, then you will probably get to the point where people will begin to find things get a bit testy."
Moving ahead for the next chapter of Australia's economic development, Lowe said that the fortunes of Australia are going to be intrinsically linked with the further growth in Asia in countries such as China, India, and Indonesia, and that Australia must adapt to take full advantage.
"While growth in China is trending lower, the share of global output produced in China will continue to rise, as per capita incomes converge towards those in the more advanced economies," Lowe said.
"As this convergence takes place, the structure of the Chinese economy will change and so too will China's economic relationship with Australia," he added.
"Exports of resources will continue to be an important part of that relationship, but increasingly trade in services and other high valued-added activities, including food, will become more important."
Lowe said that monetary policy will not be as important in shaping the new chapter of the Australian economy, with RBA measures able to do little in relation to the potential of growth in Australia.
"Over recent times, the Reserve Bank Board has not sought to overly fine-tune things as things currently stand, we look to be on course to make further progress in reducing unemployment, and moving towards the midpoint of the medium-term inflation target." Enditem
Go to Forum >>0 Comment(s)