RBA’s Stevens Says ‘Content Right Now’ on Interest Rate Setting

Reserve Bank of Australia Governor Glenn Stevens said he’s content with the current monetary policy setting and stands ready to do more if needed.

“I think low interest rates are doing the sorts of things they normally do in most respects,” Stevens said in response to questions after a speech in Sydney today. “I’d still maintain up to this point that we’re doing what can reasonably be done. But if there’s more that can reasonably be done at some point, then obviously we’d do that. But I’m content right now.”

Australia’s central bank this month reiterated it expects a period of stable interest rates as the government cuts spending and the economy transitions from mining-investment led growth. The Australian dollar has climbed 5.2 percent this year and reached an almost eight-month high earlier this month after the RBA kept its benchmark cash rate at a record low 2.5 percent for an 11th month.

Stevens’s address today was a broad sweep across the 2008 crisis and major nations’ responses, and looked at how the recovery could be accelerated. The Group of 20 nations’ growth pledge could help revive activity, Stevens said.

“Unless we think the tendency for human optimism has been completely drummed out of us, animal spirits in the ‘real economy’ will surely improve at some point,” he said. “Reforms on the supply side of the G-20 economies can impart a sense of dynamism and opportunity.”

The G-20 said in February that monetary policy should remain accommodative in many advanced economies and pledged a coordinated push to boost output by more than $2 trillion over the next five years.

‘Huge Potential’

He said there is “huge potential” for public and private investment in infrastructure if governance, risk-sharing and other issues are “successfully tackled.” Efforts to complete the main financial regulatory initiatives should deliver both “a safer system and less uncertainty,” without unnecessarily crimping growth, he said.

“The highly accommodative financial conditions will then have a more powerful effect in engendering real growth,” Stevens said. “A rising confidence dynamic could unfold. The prospects for profitable investments by businesses would be significantly improved.”

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