Reserve chief in calls for reform

AUSTRALIA is capable of producing stronger economic growth than it has for years, according to Reserve Bank governor Philip Lowe, although much will depend on Canberra’s ability to break its deadlock on reforms.

Almost a decade after the financial crisis, the “healing process” among affected nations was well advanced and Australia stood to benefit from the likely cyclical upswing in the global economy, Dr Lowe said yesterday.

“We are in a better position than we have been for some time,” he said at a conference in Canberra.

“To be clear, we are not talking about a boom and there are still plenty of risks. But globally things are better. Animal spirits have been missing for quite a while and they might just be starting to come back.”

But the “rising tide” effect would only last so long — there also needed to be a domestic focus on reforms that could lift living standards, Dr Lowe said.

His thinly veiled swipe at Canberra should not come as a surprise, with this week’s education package the latest in a long list of reforms to front a fractious Senate.

He also said households were contending with slower income growth and a slide in number of hours worked.

“Many households are also coming to grips with higher debt levels and, in our largest cities, high housing prices. We need to watch these issues carefully,” he said.

In last month’s quarterly economic update, the RBA stuck by its expectation of gross domestic product growth averaging 3 per cent by the end of the year.

JP Morgan Australia chief economist Sally Auld predicts the RBA will cut twice more to 1 per cent, although now expects those moves will come in the first half of next year.