In his address to the House of Representatives Standing Committee on Economics, RBA governor, Glenn Stevens, has commented on Australia’s position in the economy and commented that this may well be the ‘one of the shallower recessions’ the country has had.
Although Stevens is now confident in Australia’s prospects, he highlighted that it was uncertain for quite some time.
“Australia was doing better than most countries as had been anticipated. But for a few months it was not clear how much comfort we should take from that, because the economic news from abroad seemed to be so dire,” he said.
But over time it has become clear to Stevens and the RBA that the country is recovering.
“The Australian economy has been resilient, with economic activity looking stronger than expected a few months ago.
“Domestic demand has held up well, with retail sales posting a solid increase in the first half of the year.”
But Stevens also mentioned that some of the strength will only be temporary.
“Some of this strength is likely to be temporary, the result of fiscal measures that have a finite life.
“We are assuming, for example, that consumer demand and first home buyer demand for finance will be softer in the second quarter.”
But overall he said that there are many positives Australians can take out of the country’s performance.
“Survey measures of business confidence have lifted from the very low levels seen at the beginning of the years to be close to their long-run average.
“The labour market has seen considerably softer conditions, but there has been little decline in overall employment, and the rise in unemployment to date, looks smaller than had been feared.”
But with this good news came a warning from Stevens that the future is not set in stone.
“The global economy could suffer another setback of some kind. The likelihood of that has declined in our view, but the possibility remains,” he said.
Overall he was pleased with Australia’s performance and how it has coped with the downturn.
“The economy appears to be weathering a very large storm pretty well, and the community’s confidence about the future has improved commensurately.
“No doubt the future will pose its own challenges, but we are well placed to meet them.”