RBA governor, Philip Lowe has delivered a speech at the Australian National University's Crawford Australian Leadership Forum, where the central issue was growth of Global and Australian economy. Over 2017, the global economy has improved on broad base. After nearly a decade, the healing process after the financial crisis is well advanced, although there is still plenty of scar tissue. Although there are some fault lines, the Chinese economy has continued to grow, while in Europe, it has been a few years now since the underlying problems last erupted. Globally, monetary policy remains accommodative and there has been a lot of financial system repair and fiscal policy is no longer contractionary. Hence, it was expected that Australia is in a better position than earlier.Further, at some point, the cyclical upswing is anticipated, and beyond that, much depends upon demographics and technology. Many developed economies, as well as China and Korea are face big demographic challenges as populations are stagnant or declining.
Australia's longer-term prospects remain positive
In Australia, it is likely that growth over the next couple of years will be a bit stronger than it has been recently and expected to be aided by the pick-up in the global economy. The return of mining investment to more normal levels is almost complete. Monetary policy continues to provide support and survey-based measures of business conditions have improved noticeably. Employment growth has also strengthened over recent months. However, in near term economy is expected face some headwinds as with slower growth in their real incomes, decline in average hours worked and the nature of employment. Hence, there is a recalibration of expectations going on as house debt levels are moving up and, high housing prices in a few cities. Over the past couple of weeks there has been much discussion of Australia's record run of 26 years without a technical recession and it was considered as a significant achievement and done better than most countries over an extended period. But, over those 26 years country had three periods of rising unemployment and strong population growth has also flattered headline growth figures.Natural resources remain the main export earner, but Australians are increasingly employed in service industries. Right across the spectrum, competitive advantage is increasingly built on technology and management capability.
On technology, there are great advances being made in the material sciences, in power generation and storage, in genetics and the health sciences, and in computing and artificial intelligence. Although, it is difficult to be sure how these will all play out, but advances in these areas open possibilities and can transform economies and form the basis for a new wave of global investment and higher living standards. The sheer scale of global markets means that the potential gains to innovators who can tap into these markets can be huge. At the same time, innovative technologies and globalization create some losers.
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