From Glenn Stevens’ annual interview at the AFR:
Mr Stevens said he saw no need to further downgrade the outlook for economic growth, which the Reserve Bank did last month and the Treasury on Tuesday, and expressed confidence the dollar would fall if needed to offset lower export prices for iron ore, coal and energy.
“My own feeling has been if you think things are shaping up to deliver an improvement, let’s see how that goes for a while, and we still have some firepower to use if it makes sense,” he said in the interview to mark the end of 2015, his last full year in office.
…”The answer to the question is the exchange rate has been adjusting – doing its job – and I note commodity prices are still falling, so it is possible that further adjustment will occur,” he said.
Not much new. More cheer-leading of his “rebalancing” (read renewed housing bubble), failure to jawbone the currency and comfort with the outlook.
What was perhaps most interesting was a line taken about the labour market benefiting from areas of services growth that do not require much capital investment:
“So maybe we can get some of the growth we’re looking for without quite so much capital spending,” he said. “That’s sort of a working hypothesis, at least, that we’re presently entertaining. It’s an idea that does seem to square some of the things we see in the economy.”
It’s an interesting point but one must ask why did the pick-up occur in the past year and past quarter in particular? We know it is most apparent in the eastern states where the housing bubbles have been in full roar so that is almost certainly a factor. As well, one wonders what impact the removal of Tony Abbott has had given that immediately boosted wider confidence in government.
In both cases the upshot is that the jobs rebound is, as the RBA so likes to point out, probably confidence driven.
Moreover, it implies that if house prices fall and the Turnbull Government sees its Budget credibility erode with an ongoing terms of trade crash, then the job gains will be vulnerable.
