RBA chief optimistic on trade

Reserve Bank governor Glenn Stevens says Australia’s terms of trade are likely to remain high for a long period of time, thanks to strong ongoing demand for resources from Asia.

Speaking at a government forum on the economy, Mr Stevens said Australian consumers are benefiting from the strong Australian dollar, now trading near parity versus the US dollar.

The terms of trade – the gauge of export prices against import prices – have fallen in recent quarters as global commodity prices retreated.

Just last week the central bank cuts its main cash rate by a quarter point to 3.5 per cent, the second easing in as many months as it sought to bolster sentiment in the face of European and global uncertainty.

Separately, Mr Stevens said the mining boom is not to blame for Australia’s multi-speed economy.

Speaking at the federal government’s economic forum in Brisbane, Mr Stevens said a major shift in household spending and saving patterns was the overriding influence on the economy.

“I actually think that a lot of the disquiet and dissatisfaction that we see isn’t really related to the mining boom at all,” he said.

“I think it’s got a lot to do with changes of household behaviour, which come after a very unusual period of strong spending, leveraging up and saving nothing out of current income.

“And that was bound to end sooner or later, and it has.

“In fact, it ended about five years ago.

“And we are still, I think, coming to grips with the importance of that now, and I think it’s a significant factor that is behind some of the disquiet we see.”