Australia's economy is progressing in its rebalancing from mining-led growth, aided by accommodative monetary policy, a stance that will be in place for some time to come, Australia's top banker said on Thursday.
The Reserve Bank of Australia (RBA) Governor Glenn Stevens said the decline in the capital spending on Australia's resources sector is about half-way through, but the headwinds are as intense now as they are likely to get.
"It would be good if the growth was a bit stronger, but nonetheless over the past year the non-mining side of the economy has generated respectable growth in employment," Stevens told an economic conference on Thursday.
"The 'rebalancing' is occurring." In a generally upbeat speech on Australia's progress on its path to prosperity, Stevens downplayed fears recent mortgage rate rises by the "big four" banks would harm Australia's economy and need to be offset by an ease of monetary policy.
Stevens estimated the rise in mortgage rates reversed only half of one 25 basis point monetary policy change, or one quarter of the RBA's total movements this year.
"My preliminary assessment is that the macroeconomic effect of these actions in themselves may not be large," Stevens said, adding the central bank's board would keep this and the broader landscape under review.
Earlier this week the RBA missed a chance to ease monetary policy but noted if the conditions warrant, particularly due to subdued inflation, there is the scope for further cuts, which Stevens reiterated.
"Were a change to monetary policy to be required in the near term, it will almost certainly be easing, not a tightening," Stevens said. "The rate of CPI is clearly no impediment to easing."
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