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Talking Points:

• RBA Governor Stevens sees moderate growth and near-term CPI as a likely non-issue

• Stated that further accommodative measures are a possibility if necessary

• The central banker points to China’s policy uncertainty as a source of volatility

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In his testimony to Australia’s parliament, RBA Governor Glenn Stevens highlighted that further accommodative policy may be used if needed. He was clear by saying it is not likely for the Reserve Bank of Australia to be hiking interest rates any time soon.

The central banker thinks inflation is unlikely to cause near-term issues over the next two years, partly due to the falling Australian Dollar which is tracking depreciating commodity prices. A weaker currency may boost exports which can bode well for firming inflation.

Governor Stevens noted that economic growth is moderately expanding. However, real GDP – growth adjusted for inflation – is increasing at a pace lower than normal.

In regards to China, Australia’s main trading partner, Governor Stevens did not give his direct opinion of the country’s developments. He stated that the world’s second largest economy is expanding weaker than its officials want and that “some observers” have expressed concern. To his belief, a portion of international pessimism is overdone. China has experienced capital outflows and has been the catalyst for market volatility, which the RBA Governor believes is due to policy uncertainty.

The accuracy of Australia’s labor data has been in question by the financial markets. The central bank Governor noted this reservation but thinks that the data shows the job market is still better than forecasted.

original source

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