Reserve Bank of Australia
A worker walks past the Reserve Bank of Australia (RBA) building in central Sydney in this October 6, 2009 file photo. Reuters/Daniel Munoz

Australia’s economy will rise faster in the years to come as pick-up in the global wealth is giving the nation a lift. Reserve Bank of Australia Governor Philip Lowe has welcomed signs of a new lift in employment growth across the economy.

“In Australia, it is likely that growth over the next couple of years will be a bit stronger than it has been recently,” he said. He believes the global economy sits in a better position that it has been for some time.

However, Lowe stressed pressures points still exist. A close monitoring by the central bank is required.

Wage growth

Lowe noted that employment growth has grown over the previous months. Still, consumers are steadily coming to grips with slower income growth. Furthermore, he pointed to an ongoing recalibration of expectations caused by slow growth in wages and changing nature of employment. Several households are coming to grips with higher debt levels as high housing prices continue to be an issue in the country’s largest cities.

“We need to watch these issues carefully,” The Australian quotes Lowe as saying. He added that the return of mining investment is almost back to normal levels. As survey-based measures of business conditions improve, monetary policy still provides support.

His comments come following a string of mixed data reports including first quarter growth data that showed the economy slowed in the first months of 2017, while last week’s data indicated a high rise in employment creation over recent months. Unemployment rate dropped to a four-year low.

Overall, Lowe believes the long-term outlook for Australia is positive. Yet the challenges are still here.

Lowe said it is likely that average growth in per capita incomes over the next quarter of a century will be lower compared to over the past quarter of a century. He added it is something that should not be taken for granted.

It is essential to focus on reforms that can create real difference to living standards, Lowe said. He warned that without one, Australia will fall behind. Lowe said the good news is that there is no shortage of good ideas.

Since the 2008 global financial crisis, Aussie politics has become progressively more polarized as parties exploited those losing out from proposed reforms to obtain electoral advantage. The situation caused an increasing risk-aversion among government and limited action, which means the country is yet to cement a significant economic reform.

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