The cooling of Australia’s long-run mining investment boom will pose a significant challenge, but the central bank stands ready to help support an economy shifting to a new source of growth, the head of the Reserve Bank of Australia said on Wednesday.
Speaking just a day after the RBA left its cash rate unchanged at a record low 2.75 per cent, RBA Governor Glenn Stevens noted that the non-resource sectors strengthen could not be guaranteed to strengthen on cue and to the right degree.
“The Reserve Bank, for its part, has a well-established monetary policy framework. Guided by this, we will be able to continue to do our part, consistent with our mandate, to assist the transition in sources of demand that is needed,” he told a business lunch in Brisbane.
“We cannot fine-tune it - no one can promise that - but we will do what can reasonably be done.”
The RBA has slashed its cash rate by a total of 200 basis points since late 2011. Its latest move was in May.
Stevens said with interest rates low, sectors such as dwelling and non-mining business investments should pick-up in time.
He also said he was surprised by the resilience of the strong local dollar, but noted that free-floating exchange rates “do eventually adjust.”
The Australian dollar has fallen around 12 per cent in the past two months on a trade-weighted basis, bringing relief to many exporters and the tourism sector.