Reuters: Financial Services and Real Estate: Australians needlessly gloomy on economy-cenbank chief

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Australians needlessly gloomy on economy-cenbank chief Jun 8th 2012, 03:38 ADELAIDE, June 8 | Thu Jun 7, 2012 11:38pm EDT ADELAIDE, June 8 (Reuters) - Australia's top central banker on Friday called on Australians to stop being so gloomy about the economy and held out the hope that recent strong data would let them see the glass was in fact "well and truly half full". Reserve Bank of Australia (RBA) Governor Glenn Stevens also said that cuts in interest rates in past months were not aimed at reviving a boom in house prices and borrowing, arguing that a return to thrift was in the national interest. Stevens hailed figures out this week showing annual growth rose 4.3 percent in the first quarter, far above expectations. "It is to be hoped that some of the recent positive data outcomes will give pause to reflect that, actually, things have so far turned out not too badly," Stevens told an American Chamber of Commerce lunch. Core inflation was a bit above 2 percent, unemployment about 5 percent, the financial system was sound and the country benefiting from a "truly enormous" boom in mining investment. All this meant the challenges facing Australia were "infinitely preferable" to those faced by many other developed nations, said Stevens. "For Australians, the glass is well and truly half full," he said. "Yet the nature of public discussion is unrelentingly gloomy, and this has intensified over the past six months." "Numerous foreign visitors to the Reserve Bank have remarked on the surprising extent of this pessimism," he added. "Each time I travel abroad I am struck by the difference between the perceptions held by foreigners about Australia and what I read in the newspapers at home." He attributed much of this unnecessary gloom to a come-down from the decade up to 2007 when a debt-driven surge in house prices allowed consumers to feel wealthier even while spending more and saving less. As households have shifted to paying down debt and house prices have levelled off, many sectors from retail to banking and real estate have had to get used to leaner times, he said. "It is these changes in behaviour by households, in asset markets and in credit demand, that I think lie behind much of the disquiet - dissatisfaction even - that so many seem to have been expressing," said Stevens. Yet Stevens rejected any thought that recent cuts in interest rates were aimed at bringing back the boom-times. "It is not our intention either to engineer a return to a housing price boom, or to overturn the current prudent habits of households," he said. The RBA cut its main cash rate by a quarter point to 3.5 percent this week, bringing the total easing since November to 125 basis points. Stevens also noted that the central bank had to consider the interest of those who lived on their savings when setting rates, noting that popular discussion routinely ignored this sector. (Reporting by Wayne Cole) Link this Share this Digg this Email Reprints

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