This morning, the Governor of the Reserve Bank of Australia, Glenn Stevens, addressed the House of Representatives Standing Committee on Economics with a simple message - things are not as bad as you think.
In a wide-ranging address, he claimed China's boom was still continuing, Australia still had room to cut interest rates and respond to the downturn, and our economy is fundamentally strong.
"There is no reason for any downturn to be a deep one," Stevens said.
Here are five of Glenn's reasons to be cheerful:
- It's going to be tough for a year, but our long-term prospects are good
"There are reasonable grounds at this stage to think that the Australian economy will come through this very difficult episode - certainly not unscathed, but well placed to benefit from a renewed expansion. Things will be difficult over the next year. But as I have said before, the long-run prospects for Australia have not deteriorated by as much as we may all be feeling just now."
- China's boom is not over yet
"China's emergence, for example, has not finished. It has years to run and Australia will benefit from it. There are some tentative indications of a turn for the better in China in some of the most recent data, though it is too soon to know yet whether this will continue."
- We've still got room to cut interest rates
"If there is a need to use more interest rate stimulus, and if that's prudent, then we can. We have scope to do more if more is needed... I'd rather not pick a number as the resting point... it is not my present expectation that we would find ourselves at nothing, put it that way."
- We are nimble enough to respond to the crisis
"We should not lose sight of that or other positives. We can have confidence in our long-run future and in our demonstrated ability to adapt to changing circumstances. If we retain that, there is no reason for any downturn to be a deep one."
- Our economy is fundamentally in good shape
"We have claimed all along that Australia was better positioned than many countries to ride out the international difficulties
"Credit standards do seem to have tightened further over recent months and banks are seeing the inevitable increase in bad debts as the economy slows. But our major financial institutions are still in a strong condition, have access to debt and equity markets, are still earning good profits, and are in a position to lend for sound proposals.
"Our housing sector is not overbuilt; instead there is considerable pent-up demand, and affordability is improving quickly. Most of the corporate sector is not over-geared. Going into this episode, the scope to use macroeconomic stimulus was bigger than for most countries - and that scope is being used."
Related articles:
- Australia's inexorable run into deficit, and poll says we're not happy about it
- The RBA Governor is "quietly confident" we can avoid recession. Here's why he is wrong: Kohler
