Global economy has improved: RBA

Article Category: Demographics

By Glenn Stevens, 14 August 2009

Economic conditions in the global economy have improved in the past few months, Reserve Bank governor, Glenn Stevens, says.

"Things abroad hardly look rosy but they look distinctly better than they did a few months ago," Mr Stevens told a House of Representatives Economic Committee hearing in Sydney today.

"Conditions in international financial markets continue to improve. "Extreme risk aversion has abated, spreads have narrowed and capital markets have continue to thaw, even though in some cases that has relied on central banks financing activity."

The Australian economy has remained "resilient", with economic activity boosted by both foreign and local factors, Mr Stevens said.

"Exports have been remarkably strong," he said. "For Australia, they grew over the six months to March, whereas for most countries exports fell sharply over that period.

"Further growth appears to have occurred in the June quarter. "This reflects the strength of Chinese resource demand, as well as some other factors."

Mr Stevens said domestic demand has performed well in the first half of 2009, with consumer spending rising, and housing credit increasing along with home prices.

"Some of this strength is likely to be temporary, the result of fiscal measures that have a finite life," he said.

"We are assuming, for example, that consumer demand, and first-home buyer demand for finance, will be softer in the second half of the year."

The central bank will adjust the cash interest rate from its "exceptionally" low level when the time is right, Mr Stevens said. Mr Stevens noted that debt futures markets are pricing in a rate rise by the end of 2009.

He said he did not "want to give any particular steer on timing", saying the bank will adjust monetary policy "in a timely fashion, when the time is right