RBA warns against Australia's undue economic pessimism

[SYDNEY] Australia risks falling into "chronic pessimism" if it allows uncertainty about the future to obscure the strong fundamentals of the country's economy, a top central banker said on Tuesday.

Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe also noted that monetary policy alone could not boost living standards, underlining the bank's reluctance to cut interest rates from already record lows.

Pressure for further easing has mounted since data last month showed Australia's economy slowed to a crawl in the second quarter of the year, prompting much angst about what would replace the country's fading resources boom. "We do need to be careful that the uncertainty that we feel about the future ... does not mutate into chronic pessimism," Mr Lowe told an investment conference.

"If that were to happen, many of the opportunities that we do have are likely to go begging."

Mr Lowe listed a range of reasons for optimism including Australia's strong regulatory system, a well educated populace, an abundance of natural resources and access to the growing markets of Asia.

The economy had also been well served by a floating exchange rate with the local currency's decline over the last two years helping offset weakness in commodity prices and mining investment.

REUTERS