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Australia central bank chief says spurring demand not so easy

Published 02/12/2015, 07:06 PM
Updated 02/12/2015, 07:08 PM
RBA governor on outlook

Investing.com - Monetary policy can still help rebalance the economy even it can't spur demand growth as it has in the past, Reserve Bank of Australia Governor Glenn Stevens said Friday.

The bank is "very conscious of the possibility that monetary policy's power to summon up additional growth in demand could, at these levels of interest rates, be less than it was in the past," Stevens said in an opening statement to the House of Representatives Standing Committee on Economics.

"A decade ago, when there was, it seems, an underlying latent desire among households to borrow and spend, it was perhaps easier for a reduction in interest rates to spark additional demand in the economy. Today, such a channel may be less effective," Stevens said.

"Nonetheless, we do not think that monetary policy has reached the point where it has no ability at all to give additional support to demand. Our judgment is that it still has some ability to assist the transition the economy is making and we regarded it as appropriate to provide that support," Stevens said.

The RBA assumes lower interest and exchange rates than before, Stevens said in the bank's February Statement of Monetary Policy. However, these are assumptions rather than forecasts or commitments to a course of action, he said.

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