RBA’s Stevens Suggests Fiscal Spending Needed to Rev Up Economy

Reserve Bank of Australia Governor Glenn Stevens suggested on Wednesday that persistently lower interest rates might not be the ideal approach for fostering economic growth, implicitly referencing a lack of fiscal stimulus as he prepares to leave his position next month.

In what appeared to be a farewell address, Stevens spoke ahead of his deputy, Philip Lowe, who will take over in September. He provided a broader perspective on Australia’s economic history, noting that while gross public debt at various government levels constitutes approximately 40% of GDP, gross household debt is significantly higher at around 125% of GDP.

Stevens stated, “That is not unmanageable, but nor is it a low number. It’s interesting to consider which sector could absorb more debt if a substantial demand stimulus were required.”

He emphasized that discussions regarding government debt in Australia often overlook the scale of private debt. However, he did not provide further information on whether the upcoming Reserve Bank of Australia meeting would alter the current record low interest rate of 1.50%, established at the August 2 meeting.