BRISBANE, April 3 Australia's top central banker
cautioned on Thursday that it was far too early to know if
Australia will manage a slowdown in mining investment without
suffering a slump, suggesting interest rates would need to stay
at rock bottom for some time yet.
Reserve Bank of Australia (RBA) Governor Glenn Stevens said
there were promising early signs that things might not turn out
"But early signs are just that: early. It is far too soon to
think about counting any chickens yet," Stevens told an American
Chamber of Commerce business luncheon in Brisbane.
"Let's also be clear that the capacity to fine-tune these
outcomes is very limited," he said.
Earlier this week, the RBA left rates at an historic low of
2.5 percent at its April policy meeting and said the outlook was
for a further period of stability. Rates have already been on
hold since the last cut in August, 2013.
The central bank has cited a pick up in consumer spending,
higher household wealth, rising house prices and a revival in
home building as reasons for optimism about growth.
Stevens noted that even if the handover from mining
investment was successful, Australia faced tough challenges over
the medium term.
These included finding a path to fiscal sustainability and
dealing with an ageing population.
"The answer - the only answer - is growth," said Stevens.
"To some extent we will, hopefully, be able to lessen the
problem through higher labour participation, for longer. But
most of all we will need higher productivity of those working."
This was the same challenge faced by the Group of 20 nations
when they adopted a goal of raising economic output at a meeting
in Sydney earlier this year.
"This goal is not to be achieved by clever programs of cheap
money devised by central banks," said Stevens. "Nor is it to be
the result of fiscal adventurism."
Rather governments would have to enact politically difficult
reforms, from lowering trade barriers, to encouraging labour
mobility and putting retirement schemes on a sound footing.
(Reporting by Wayne Cole; Editing by Paul Tait & Shri