All Australia needs is economic growth: RBA chief Glenn Stevens

Reserve Bank of Australia Governor Glenn Stevens told the National Reforms Summit in Sydney on Wednesday that all Australia needs is economic growth to solve its budget problems.

“The fiscal policy debate, usually framed as when will we get back to surplus? is actually about: how do we get more growth?,” he said. “Other discussions, so often framed as about fairness that is income distribution might be better framed as: how do we grow the pie?”

Despite low interest rates and moderate levels of business and consumer confidence, economic growth at a minimum rate of 3 percent seems like a tough goal for Australia to achieve at the moment.

According to AAP, Stevens pointed out that a fair federal budget can only be prepared if there is more tax revenue as a result of more economic growth. He also said economic policy should focus only on economic growth on a sustainable basis, and that most budget measures adopted for improving growth are short term.

“The kind of growth we want won't be delivered just by central bank adjustments to interest rates or short-term fiscal initiatives that bring forward demand from next year, only to have to give it back then,” he said. “A key question worth asking is: how do we generate more growth? Not temporary, flash-in-the-pan growth, but sustainable growth.”

However in July, the central bank had said that record-low interest rates and a growing population will help the nation to pick up growth to an average of 3 percent in the long run. It has also been relying on the steady flow of migrants into the country to help lift the economy.

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