We are in recession – RBA chief

The Australian economy is in recession and maintaining confidence is key to a local recovery, the governor of the Reserve Bank said today.

“Whether or not the next GDP (gross domestic product) statistic, due in early June, shows another decline, I think the reasonable person, looking at all the information available now, would come to the conclusion that the Australian economy, too, is in recession,” said Mr Stevens.

The current recession, triggered by slumping economies struggling with the financial crisis, means “Australians cannot do a great deal to make these improved international conditions come to pass,” he said.

However, a lack of confidence is extending the effect of the drop in investment and lending both at home and abroad, he said.

“What can policy-makers do to help?” Mr Stevens said. “Unfortunately, there is no lever marked ‘confidence’ that policy-makers can take hold of.”

Mr Stevens said the role of the central banks was to foster confidence in the current climate, where “global growth will be, for a while at least, lower on average than we saw for most of the past decade”.

The RBA governor’s speech, made to the Australian Institute of Company Directors, comes the same day the Reserve Board’s April minutes show the central bank underestimated the weakness in the economy evident in March but flagged a recovery by the end of the calendar year.

article excerpts smh.com.au