The Reserve Bank governor has declared a lift in economic growth, low inflation and falling unemployment as a “pretty good set of numbers”.
But Philip Lowe, giving his opening address to the House of Representatives’ economics committee, has said he is more concerned about events in the US that could have a flow-on impact to the global economy.
Dr Lowe said since his last appearance before the committee, the Australian economy had moved in the right direction.
“According to the most recent data, GDP growth is 3.1 per cent, inflation is around 2 per cent and the unemployment rate is now below 5.5 per cent,” he said.
“In the broad sweep of our economic history, these are a pretty good set of numbers.”
Dr Lowe said looking forward, there should be even better developments, especially for those looking for a job.
“We would, of course, like them to be better — we are still short of full employment and we would like to be more confident that inflation will be sustained at a level consistent with the target,” he said.
“But if things work out as expected, we are likely to make further gradual progress on both fronts over the next couple of years.”
Dr Lowe said one of the growing risks to the global economy were developments in the US.
Referencing the recent large company and personal income tax cuts, Dr Lowe said it was a major concern.
“The US economy is experiencing a sizeable fiscal stimulus at a time of limited spare capacity, so growth there could surprise on the upside. At the same time, financial markets remain relaxed about the implications of this for inflation,” he said.
“I am less relaxed: it is highly unusual to have such stimulatory fiscal policy when the economy is already operating at a very high level of capacity.
“One can’t rule out the possibility that the Federal Reserve will have to withdraw monetary accommodation more quickly than currently projected, with possibly disruptive consequences in financial markets.”
Dr Lowe said there continued to be signs that wages were starting to improve, but added this would only be gradual.
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