Notes from RBA’s Stevens’ Testimony

Reserve Bank of Australia Governor Glenn Stevens delivered his semi-annual testimony to a parliamentary panel in Brisbane today in which he indicated lower interest rates were unlikely to accelerate growth; rather, what the economy needed was a release of “animal spirits.”

Interest rates, which have been unchanged at a record-low 2.5 percent for the past year, are unlikely to be adjusted.  “I’ve allowed the horse to come to the water of cheaper funding. I can’t make it drink,” Stevens told the committee of lawmakers.

“The governor’s testimony indicates that other issues, besides monetary policy, are holding growth back,” said Michael Workman, a senior economist at Commonwealth Bank of Australia. “Namely, a consistent and sustained lift in business confidence is required which would lead to higher non-mining business investment. The shift to more risk aversion by households and business restrains economic growth.”


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