RBA Governor call for perspective on economic doom and gloom

25 June 2019

Governor of the Reserve Bank of Australia Phillip Lowe has played down the likelihood of another global financial crisis while urging governments to spend more on infrastructure projects to boost economic growth.

Speaking at the ANU Crawford Leadership Forum, Mr Lowe said it was important to keep perspective in the face of economic doom and gloom.

"It's true the global economy has slowed, but it's still reasonable. We wish it were better but it's still reasonable and I think we need to keep that in perspective," Mr Lowe said.

Responding to the prospect of another global financial crisis similar to that of 2007-08 Mr Lowe said that in his view that would be quite unlikely.

"I say that because the financial system is much stronger than it was a decade ago," he said.

"Capital levels are much higher, liquidity ratios are much higher, bank balance sheets are simpler.

"I don't think we are going to see the financial amplification or the financial shock we saw a decade ago."

He did however encourage the Australian Government to be ready to loosen the purse strings for infrastructure spending.

"I've long been talking about the benefits of infrastructure investment. It would benefit the demand side of the economy and it would add to the productive capacity of the nation," Mr Lowe said.

"In Australia but also globally I think there's a lot to be said for further spending on infrastructure.

"Governments both here and overseas should have their top drawers full of good ideas that are shovel-ready in case growth slows."

Lowe also showed support for more independence when it comes to infrastructure analysis and funding decisions.

"Some more independence for project selection from the political process would be a good idea," he said.

"Thirty years ago it was considered crazy to give people like me and my board the power to set interest rates. It was too important, it needed to be done by government.

"Society correctly decided that we got sub-optimal outcomes by leaving those decisions to politicians, and that you are better off leaving them to people like me and my board.

"You get better outcomes over time. I think the same logic can be used for infrastructure selection."

The ANU Crawford Leadership Forum will run 24-25 June and brings together Australia's top leaders from business, government, and academia to address the major geopolitical and economic challenges facing contemporary policy makers.