According to the Governor of Reserve Bank, Glenn Stevens Australians should have “quiet confidence for the future”.

Mr. Stevens also says that we should not give in to gloomy talk about the economy.

“The biggest mistake we could make would be to talk ourselves into unnecessary economic weakness.  Yes, the situation is serious.  But ……… the long run prospects for the Australian economy have not deteriorated to the extent that might be suggested by some of the gloomy talk that is around.

We ought to go forward with some quiet confidence in our own abilities and in the opportunities that are on offer”.

Things are definitely looking better on some fronts.  Official inflation figures are beginning to show that the inflation rate is dropping quickly.  For example petrol prices are moving backwards at quite a pace and are getting close to a dollar per litre.

Falling oil prices reduce inflationary pressures and make it easier for the Reserve Bank to lower interest rates.  It is expected that the Reserve Bank will cut interest rates by between .75% and 1% when it meets next month.  According to Mr. Stevens the bank has to continue to strike the right balance between containing inflation and stimulating growth.

According to Mr. Stevens too, despite falling interest rates consumers would do well to adopt a more conservative attitude to debt build up.

There is pressure on the Federal Government to announce further spending measures in addition to the $10.4 billion spending package it unveiled in October.  Since then the government has announced a $6 billion car industry assistance package that economists have criticized for propping up an ailing industry.

This week the government announced $300 million in grants for local council projects provided the money is spent by next September.  Mr. Stevens said that it was important that the government continued to support worthwhile public investment.  “That said it is still important for fiscal measures to pass the good policy test.  Poor public policy proposals should not be accepted simply because they are presented as boosting short term aggregate demand.

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