Glenn Stevens: How Australia is tracking

Earlier in December, the Governor of the Reserve Bank of Australia (RBA), Glenn Stevens, sat down with journalists from the Australian Financial Review for an annual chat on where, economically, he thinks Australia and the world is headed. For the record, he is pretty happy that everything is under control, that abnormal terms of trade and growth are returning to their historical norm and that we are not and are not likely to be in recession in the foreseeable future.

A brief summary of some main points touched on in the AFR interview are as follows:

On the exchange rate: Mr Stevens would like to see the value of the Australian dollar drop a little further and expects it to be lower over the next twelve months. He expects this to alter consumer spending behaviour by shifting some of our overseas-based purchases back to domestic producers.

To quote:  “Longer-term, we’ve come from US$ 1.05 to now US82¢ and that was a very elevated level, very unusual. Surely unsustainable and it hasn’t been sustained. And some further adjustment is going to have us much more like normal historical levels, at least against the US dollar and maybe some of the others. But I think that process is not yet complete. It has a bit further to go.”

On interest rates: Despite current media commentary on the possibility of a rate cut in 2015, Mr Stevens was clear that he’s not expecting either a tightening or relaxing of monetary policy in the near future.

To quote:  “In my view, over the past year or so, I have been asking myself what can we do that will be most conducive to supporting confidence, predictability, the sense that people can make some plans for their business, their own life, whatever it might be. And the view I came to pretty early on was: what we should be doing is giving a message of stability and predictability insofar as we can.”

On oil prices: The recent fall (main due to increased supply as opposed to falling demand) is good! Unless you’re a producer, of course, but the vast majority of people aren’t. Falling oil prices are, in Mr Steven’s view, good for global growth.

To quote: “Cheaper natural resources and energy is actually good for global growth. So I’m a bit reluctant, I must say, to get too pessimistic about the global outlook on that score.”

On the domestic economy: It’s good! We need to improve our terms of trade and our politicians need to start talking the real talk on how we are to collectively afford some of the expensive initiatives the Australian public want, but unemployment is manageable, inflation is controlled and our credit rating remains great.

To quote: “I guess what we’re trying to say is let’s have the adult conversation about these things before we get to that day if we possibly can. It would be very disappointing if what we find is we can’t have it until we are in a crisis.”

On the term” income recession”: It’s just arithmetic!

To quote: “The use of the term “income recession”, I think, is the latest inventive way of using the R-word, to find an adjective to put in front of it. The arithmetic is such that it wouldn’t matter how fast the economy was growing. If you get a big enough fall in the terms of trade over 2 quarters you will be able to say we’ve got an income recession. That’s just arithmetic. More substantively, what’s really is happening is the purchasing power of Australians over foreign goods and services that result from what we export has gone down… The economy is not in recession, it’s not contracting, we’re not having hundreds of thousands of jobs lost over a year. We’re not growing jobs quite as quickly as we want to, but we’re not in a recession.”

You can read the full transcript of the interview here.

Glenn Stevens: How Australia is tracking

Glenn Stevens: How Australia is tracking

Earlier in December, the Governor of the Reserve Bank of Australia (RBA), Glenn Stevens, sat down with journalists from the Australian Economic Review for an annual chat on exactly where, economically, he thinks Australia and the world is headed. For the record, he is fairly happy that everything is below control, that abnormal terms of trade and growth are returning to their historical norm and that we are not and are not most likely to be in recession in the foreseeable future.

A short summary of some main points touched on in the AFR interview are as follows:

On the exchange price: Mr Stevens would like to see the worth of the Australian dollar drop a tiny additional and expects it to be reduced over the next twelve months. He expects this to alter consumer spending behaviour by shifting some of our overseas-primarily based purchases back to domestic producers.

To quote:  “Longer-term, we’ve come from US$ 1.05 to now US82¢ and that was a extremely elevated level, extremely unusual. Certainly unsustainable and it hasn’t been sustained. And some additional adjustment is going to have us significantly far more like normal historical levels, at least against the US dollar and possibly some of the others. But I believe that process is not but comprehensive. It has a bit further to go.”

On interest prices: Regardless of current media commentary on the possibility of a price reduce in 2015, Mr Stevens was clear that he’s not expecting either a tightening or relaxing of monetary policy in the close to future.

To quote:  “In my view, more than the past year or so, I have been asking myself what can we do that will be most conducive to supporting self-assurance, predictability, the sense that men and women can make some plans for their enterprise, their own life, what ever it may well be. And the view I came to fairly early on was: what we should be carrying out is providing a message of stability and predictability insofar as we can.”

On oil costs: The recent fall (major due to improved provide as opposed to falling demand) is good! Unless you are a producer, of course, but the vast majority of folks aren’t. Falling oil costs are, in Mr Steven’s view, excellent for international growth.

To quote: “Cheaper all-natural resources and power is in fact good for worldwide growth. So I’m a bit reluctant, I should say, to get also pessimistic about the worldwide outlook on that score.”

On the domestic economy: It’s great! We want to enhance our terms of trade and our politicians require to start off speaking the genuine speak on how we are to collectively afford some of the expensive initiatives the Australian public want, but unemployment is manageable, inflation is controlled and our credit rating remains excellent.

To quote: “I guess what we’re attempting to say is let’s have the adult conversation about these items ahead of we get to that day if we possibly can. It would be very disappointing if what we uncover is we can’t have it until we are in a crisis.”

On the term” earnings recession”: It’s just arithmetic!

To quote: “The use of the term “income recession”, I think, is the latest inventive way of employing the R-word, to locate an adjective to put in front of it. The arithmetic is such that it wouldn’t matter how quickly the economy was developing. If you get a huge sufficient fall in the terms of trade over 2 quarters you will be capable to say we’ve got an earnings recession. That’s just arithmetic. Much more substantively, what’s really is happening is the buying power of Australians over foreign goods and services that outcome from what we export has gone down… The economy is not in recession, it’s not contracting, we’re not getting hundreds of thousands of jobs lost over a year. We’re not developing jobs very as swiftly as we want to, but we’re not in a recession.”

You can study the full transcript of the interview here.

Glenn Stevens: How Australia is tracking

Glenn Stevens: How Australia is tracking

Earlier in December, the Governor of the Reserve Bank of Australia (RBA), Glenn Stevens, sat down with journalists from the Australian Monetary Review for an annual chat on where, economically, he thinks Australia and the globe is headed. For the record, he is pretty satisfied that almost everything is under handle, that abnormal terms of trade and development are returning to their historical norm and that we are not and are not most likely to be in recession in the foreseeable future.

A short summary of some major points touched on in the AFR interview are as follows:

On the exchange rate: Mr Stevens would like to see the worth of the Australian dollar drop a tiny additional and expects it to be reduce over the subsequent twelve months. He expects this to alter customer spending behaviour by shifting some of our overseas-based purchases back to domestic producers.

To quote:  “Longer-term, we’ve come from US$ 1.05 to now US82¢ and that was a very elevated level, very uncommon. Certainly unsustainable and it hasn’t been sustained. And some additional adjustment is going to have us much much more like standard historical levels, at least against the US dollar and perhaps some of the other folks. But I think that method is not but comprehensive. It has a bit additional to go.”

On interest prices: In spite of current media commentary on the possibility of a rate cut in 2015, Mr Stevens was clear that he’s not expecting either a tightening or relaxing of monetary policy in the close to future.

To quote:  “In my view, more than the past year or so, I have been asking myself what can we do that will be most conducive to supporting confidence, predictability, the sense that people can make some plans for their business, their own life, what ever it might be. And the view I came to pretty early on was: what we must be performing is providing a message of stability and predictability insofar as we can.”

On oil rates: The recent fall (primary due to enhanced provide as opposed to falling demand) is good! Unless you’re a producer, of course, but the vast majority of people are not. Falling oil prices are, in Mr Steven’s view, good for international growth.

To quote: “Cheaper natural resources and power is actually excellent for international growth. So I’m a bit reluctant, I must say, to get too pessimistic about the international outlook on that score.”

On the domestic economy: It is excellent! We need to have to boost our terms of trade and our politicians require to commence speaking the actual talk on how we are to collectively afford some of the high-priced initiatives the Australian public want, but unemployment is manageable, inflation is controlled and our credit rating remains great.

To quote: “I guess what we’re trying to say is let’s have the adult conversation about these items before we get to that day if we possibly can. It would be very disappointing if what we locate is we cannot have it until we are in a crisis.”

On the term” earnings recession”: It’s just arithmetic!

To quote: “The use of the term “income recession”, I consider, is the latest inventive way of making use of the R-word, to locate an adjective to place in front of it. The arithmetic is such that it wouldn’t matter how quickly the economy was developing. If you get a huge adequate fall in the terms of trade more than 2 quarters you will be able to say we’ve got an income recession. That’s just arithmetic. More substantively, what’s actually is happening is the getting power of Australians over foreign goods and solutions that outcome from what we export has gone down… The economy is not in recession, it’s not contracting, we’re not possessing hundreds of thousands of jobs lost over a year. We’re not increasing jobs very as rapidly as we want to, but we’re not in a recession.”

You can read the complete transcript of the interview here.

Glenn Stevens: How Australia is tracking