Reserve Bank of Australia Governor Glenn Stevens said it’s too early to be sure a handover from mining investment to domestic-led growth will occur smoothly.
“There are some promising early signs that things may turn out not too badly,” Stevens said of the transition in the text of a speech today in Queensland’s capital, Brisbane. “But early signs are just that: early. It is far too soon to think about counting any chickens yet. Let’s also be clear that the capacity to fine-tune these outcomes is very limited.”
Markets and economists predict the central bank will likely leave interest rates unchanged at a record low this year to avoid a growth gap emerging as mining companies plan fewer projects. Stevens, who didn’t directly address monetary policy or the currency, has previously said borrowing costs, currently at 2.5 percent, are likely to remain steady for a period as he seeks to encourage household spending and construction.
The governor today said Queensland’s property market, where overbuilding in the wrong areas in response to rising prices led to a depressed period, held lessons for the rest of the country. “Even if a full-blown crisis does not eventuate, as was true of Australia, overdoing it on housing on the way up is usually followed by a fairly extended period of working off the problems,” he said.
The governor also referred to longer-term issues for Australia: fiscal sustainability and demographics.
“Our situation is not dire by the standards of other countries but neither are the issues trivial,” he said of the fiscal outlook. “A conversation needs to be had about this.”
The Australian dollar rose more than 3 percent last month and the currency’s strength has hurt the nation’s manufacturers.
Boeing Co., the world’s largest planemaker, said it will cut about 300 jobs in its Australian unit in a statement today. A month earlier, Stevens contrasted the success of Boeing Australia’s “positive story” against the suffering of workers in carmaker plants that have announced they’re shutting down.
Boeing’s statement came a day after BP Plc and Philip Morris International Inc. announced more than 500 in combined job cuts and the closure of plants. The cutbacks pose a challenge for Prime Minister Tony Abbott, who won an election last September pledging to restore confidence in the economy.