Reserve Bank of Australia Governor Glenn Stevens said the economy is adjusting well to falling commodity prices and declining resource investment as he sought to assuage concerns in the mining epicenter of Western Australia.
“Inflationary pressure was relatively contained on the way up, and while aggregate growth has been a little disappointing for the past couple of years, in the circumstances we face -- including very difficult global conditions in the aftermath of the financial crisis -- the outcomes are, I think, quite respectable,” Stevens said in the text of a speech in Perth Wednesday.
The governor acknowledged the nation’s terms of trade, or export prices relative to import prices, could fall further as demand for resources from China wanes and increased supply of minerals continues to come on line. Still, the outlook for the national economy continues to be for moderate growth, he said.
Western Australia -- an engine room of the decade-long global commodity boom -- is now experiencing rising unemployment and falling house prices as the bonanza unwinds. The RBA held its policy meeting in Perth Tuesday for the first time in four years and left interest rates unchanged at a record-low 2 percent. In his speech, Stevens contrasted the state of the mining industry between 2011 and now.
Iron ore was trading at about $170 a ton compared with about $40 now
Hard coking coal was bringing in about $300 a ton compared to $75 now
The Australian dollar was at about $1.07 compared to about 73 U.S. cents now; and
Investment in the resources industry in 2011 had trebled since 2005 and would peak the following year after rising a further 50%
Stevens noted massive investment was still under way in liquefied natural gas and that as projects in Western Australia came on line, the country’s LNG production capacity would reach more than 80 million tons a year from 10 million tons a decade ago.
“Looking ahead, nationally, the outlook appears to be for a continuation of moderate growth,” Stevens said. “The unemployment rate is projected to remain around 6 percent or a little above over the next year, before gradually declining.”
Stevens didn’t make any new comments on the outlook for monetary policy in the speech text.