Reserve Bank of Australia (RBA) governor Glenn Stevens confirmed that the Australian economy is facing the prospect of dealing with a rising national income, thanks to the resurging resources boom, yet he warned that the surplus run must be utilised to further shore up the savings account of the federal government.

The wise thing to do, according to Mr Stevens, is to set aside a special fund that would serve as a buffer for anticipated inflations from the minerals boom and ease down the over-expansion of the local economy from the phenomenal surge in export earnings.

Speaking on a business dinner in Melbourne on Monday evening, Mr Stevens insisted that in light of the record levels of the country's terms of trade, private and public savings should also follow suit as he informed his audience that "on all indications available, we are living through an event that occurs maybe once or twice in a century."

The RBA governor stressed that Australia's surging mining boom would inevitably lead to expansionary spill-over of more investment supplies that the country must closely watch for the aftershocks of overheating and to check such eventuality, the nation must absorb "structural adjustment so as to make it occur in as low cost a way as possible."

While economist are anticipating iron ore prices to retreat by as much as 30 percent over the coming years, Australia would still maintain its significantly high levels of terms of trade, which Mr Stevens said should provide Australia a better opportunity to ramp up its savings-generating activities.

However, the federal government also needs to ensure that while public expenditures are being moderated or even cut back, the essence of national productivity should not be sacrificed in the process in order to maintain at least a steady level of the economy.

The RBA noted that the current savings trend speaks very well for Australia as latest data revealed that households are starting to accumulate more funds to set aside as more and more Aussies are willing to hold on to at most 10 percent of their disposable incomes.

Mr Stevens expressed confidence that the Australian economy is expanding much faster than any other major economies across the globe though he conceded that the growths seen in China and India pose some challenge for the country's economic policy makers.

The answer to such challenge, according to the RBA, is to prudently utilise savings as a natural hedge against the imbalances that could crop up from Australia's trading relations with other economies, and crucial to such measures is the economic management skill of the sitting Australian government.

The bottom line for Mr Stevens is the importance of savings, which could easily lose its significance in times of prosperity as he noted that "increasing saving was preferable to runaway consumption."