[SYDNEY] Australia's very low interest rates should continue to encourage households to spend more and save less, a top central banker said on Thursday, playing down concerns that soft income growth would drag on spending.
Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent also said conditions were ripe for a pick-up in business investment outside the cooling mining sector, which would help lift economic growth above trend by 2016. "The very low level of interest rates is supporting, and will continue to support, growth of household expenditure," said Kent, who heads the central bank's economics unit. "In time, this is expected to support a recovery in non-mining business investment, and the economy more broadly, including an improvement in conditions in the labour market." In the near term, growth was expected to remain sub-par largely because of falling mining investment, a still-high local currency and fiscal tightening across government, he added.
Australia's economy grew around 2.5 per cent on average in the year to June, below the 3.25 per cent pace generally considered to be trend.
Kent repeated the RBA's standard view that the Australian dollar was still above most measures of its fundamental value, but stopped short of actively calling for a further fall in the currency.