SYDNEY, Aug 14 (Reuters) - Australia's central bank Governor Glenn Stevens gave an upbeat assessment of Australia's economy on Friday, and said interest rates would rise in an orderly fashion from the current emergency setting to more normal levels. Here are some of the key quotes from Stevens from his semi-annual testimony to a parliamentary hearing.
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GLOBAL OUTLOOK
"Things abroad hardly look rosy, but they look distinctly better than they did a few months ago. Conditions in international financial markets have continued to improve. There have been occasional reversals, but each time the improving trend has resumed. Extreme risk aversion has abated; spreads have narrowed; capital markets have continued to thaw, though in some overseas cases this has relied heavily on central bank financing activities.
"Financial institutions in the United States and Europe have recorded better earnings. Global equity markets have risen to be nearly 50 percent above the lows in early March this year. There has been substantial new issuance of debt and equity. Spot commodity prices have picked up.
"In addition, it appears that the really large contractions in major countries' GDP are now behind us and that global output is levelling out. International trade and global industrial production have even recorded small gains over recent months. Of course there is a long way to go and there are notable differences in economic activity across regions."
AUSTRALIAN OUTLOOK
"Last time we met, I said that there were reasonable grounds to think that the Australian economy would come through this very difficult episode as well placed as any to benefit from renewed expansion. That remains my view. The economy appears to be weathering a very large storm pretty well, and the community's confidence about the future has improved commensurately. No doubt the future will pose its own challenges, but we are well placed to meet them."
INTEREST RATES, EMERGENCY SETTING
"What we've got in place at the moment is kind of, you know, it's an emergency setting.
"It's a setting of the cash rate that is the lowest in 40 years, put in place in anticipation that the economy would be seriously weak, and that there were very real risks to the downside that stem from a global situation that none of us have lived through before.
"As the set of risks that you think you face start to shift, now at some point you are going to have to make a response to move away from the emergency setting."
RATES TIMINGS
"I don't want to give any particular steer on timing today. On the timing of when we might adjust policy, that's an issue about which one keeps an open mind at this point, obviously.
"When we reach the point of judging that this exceptional degree of stimulus isn't needed, it will be the right thing to do to start removing it before it's excessive for too long.
"Exactly when that begins, you won't be surprised to hear me remain a little coy about that. People are getting very excited out there and it is not my job to add to the excitement, I don't think. In a timely fashion, when the time is right is the answer."
NORMAL RATES
"It's a good deal north of what the cash rate is now. I don't want to endorse a particular number because that, I think, would trigger all sorts of excitement out there. We shouldn't have a dogmatic opinion about exactly where this so-called normal is, because for a start it's not necessarily a constant."
HOUSING
"It still strikes me as a little bit hard to explain why the price of dwellings is towards the upper end of what you see internationally. I don't have an adequate explanation really to offer for that. But it strikes me that that is an issue."
RATES TO COOL HOUSING?
"I wouldn't be proposing a policy of raising interest rates simply because house prices were rising. It is one of the factors. It is one of the parts of the whole mosaic that's the economy, to which we try to calibrate our instrument."
BUDGET
"Right now I suspect the budget deficit is probably a bit smaller than was in the budget, and the rate of debt accumulation might even be a little bit slower than we thought. We don't know yet."
WHOLESALE BANK GUARANTEES
"I think we are not far now from a world where those wholesale guarantees won't be needed.
"Most countries actually put an end date for when the guarantees would finish. A number of them have had to extend it, but for most of them it is the end of this year.
UNEMPLOYMENT
"The chances are now that we are not going to get the 8.5 percent peak in unemployment.
"The chances are now I think the peak is going to be noticeably less than that." (Reporting by James Grubel)