Glenn Stevens says economic outlook good

Article Category: Demographics

By AAP, 28 September 2009

RESERVE Bank (RBA) Governor, Glenn Stevens, says Australia's medium term prospects are good, rates will rise and that he is glad he did not have to cut rates to zero per cent.

Mr Stevens says he feels "very very pleased and fortunate" that the RBA did not have to cut interest rates to zero per cent.

It was "immeasurably to Australia's advantage that, however we have arrived at where we are, that we do not find ourselves with the overnight rate at zero" and with the RBA having to buy government debt outright, he said.

The cash rate is three per cent after the RBA delivered 425 basis points of cuts between September last year and April 2009.

"I have maintained throughout that Australia's medium-term prospects remained good and that we should not lose confidence," Mr Stevens told the Senate Economics References Committee today.

"More people seem to be taking that same view.

"Measures of business and household confidence have shown a very substantial pick-up from the low points reached earlier this year."

Mr Stevens said told the committee, which is inquiring into the Federal Government's fiscal stimulus measures, that by the standards of past weakness, this had been a "mild downturn".

"Although the evidence is as yet incomplete, this episode has been much less serious that those in the mid-1970s, the early 1980s and the early 1990s," he said.

"It has also been very mild indeed in comparison with recent outcomes in many other countries, where deep recessions have been experienced.

"It is reasonable to conclude, against the benchmarks of historical and international experience, that Australia has done quite well on this occasion."

"In the case of monetary policy, the bank has already signalled that interest rates can be expected, at some point, to move off their currently unusually low levels, as recovery proceeds," Mr Stevens told the committee hearing.