Reserve Bank governor Glenn Stevens has presented a cautiously optimistic outlook on the Australian economy, indicating that unemployment may have bottomed.
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Here’s the kicker. Stevens also referred to the Board’s ability to cut interest rates again, if necessary, during a speech to a parliamentary committee.
“It’s not great, and it is not the ebullient consumer and business community that we had from the late ’90s through to 2006, but I’m sorry, that is not coming back”.
“Some fretting about the first increase in USA interest rates for nine years is to be expected, no matter how well telegraphed it has been”, he said.
The Reserve Bank of Australia hasn’t cut interest rates since May, but that could soon change.
“There is still a pretty good chance that we will come out of this episode fairly well, and much better than we came out of previous episodes of this type”, he said.
Meanwhile, Australia’s economy is well placed to emerge strongly from its current slowdown, as falling commodity prices and a slowdown in China are hurting growth, Mr. Stevens said. Some cushioning has come from a lower Australian dollar.
Fed chair Janet Yellen’s Australian counterpart acknowledge that lifting rates was going to trigger some financial market volatility, but indicated that was not a reason to delay indefinitely.
“The more important factor, though, will be the pace of subsequent increases”.
“There will be a lot of people in financial markets right around the world whose career experience to date does not encompass having seen the Fed raise the funds rate, so you have to think there’ll be a few upsets here and there”, Mr Stevens stated.
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Granted his wish of a lower Aussie dollar, Mr Stevens now wants a similar move in the unemployment rate, which he said is too high at 6.2 per cent.
