Jobless rate not as bad as expected
Tuesday July 28, 2009Australia has navigated the global financial crisis better than most of its industrialised peers, with the jobless rate not as bad as expected, the RBA said.
Reserve Bank of Australia (RBA) governor Glenn Stevens said on Tuesday that while the nation had felt the impact of the downturn, it might turn out to be not one of the more serious such events.
Mr Stevens said consumer confidence has recovered a lot of lost ground, the rise in unemployment has been less than first feared and demand for housing finance has risen significantly due to record low interest rates.
'We cannot claim that Australia has avoided the downturn at all,' he said during a speech to The Anika Foundation lunch, supported by Australian Business Economists and Macquarie Group Ltd.
'It appears at this stage, however, that the downturn we are having may turn out not to be one of the more serious ones of the post-War era, in contrast to the experiences of so many other countries.
'It is becoming more common for Australians to see the glass as half full than as half empty.
'Put another way, we can much more easily imagine upside risks to the outlook, to balance out the downside one, than was the can six months ago.'
Mr Stevens said while conditions remain very difficult in some sectors of the economy, consumer confidence had recovered over the past six months due to the impact of federal government fiscal stimulus packages and official interest rate cuts.
'Consumer confidence has also recovered a lot of ground,' he said.
'In fact in recent readings it has been at or above long-term averages.
'This should not be entirely surprising.
'Households have seen significant gains from the various fiscal packages as well as declining petrol prices.'
Even though unemployment had risen, it was not as bad as had been expected.
'To date, however, the rise in unemployment has been a little slower than earlier feared, and the effect of the more positive factors for households has, so far, outweighed fears of unemployment,' Mr Stevens said.
But Mr Stevens also warned that the days of easy credit availability seen in the period up to 2007 are unlikely to be seen again any time soon, saying it would be a mistake to assume that 'easy prosperity' is on the way back.
'The path to economic health for the major countries of the world will still be a difficult one, because the legacy of the crisis will cast a shadow for some time,' he said.
Mr Stevens said major international banks will be diminished in their stature and balance sheet capability.
'If global regulators have their way, the world will be characterised by less leverage, and scarcer and more expensive credit, than in the earlier period,' he said.
'We here in Australia have to accept that fact and accommodate it in our thinking.'
Mr Stevens said the prominence of household demand in driving economic expansion from the mid-1990s to the mid-2000s should not be expected to recur in the next upswing.
The rise asset values seen in the mid-1990s was likely to have been a one time adjustment' rather than part of a permanent trend.
Mr Steven said one challenge in the near term will be how to ensure that the ready availability and low cost of housing finance is translated into more dwellings.
'If we fail to do that - if all we end up with is higher prices and not many more dwellings - then it will be very disappointing, indeed quite disturbing,' Mr Stevens said.
