Australia economy flexible, China still offers opportunities: RBA

[September 09, 2015]  By Ian Chua

SYDNEY (Reuters) - Australia's falling exchange rate, flexible labor force and record low interest rates are all helping to support the economy, a top Australian central banker said on Wednesday, but the country will have to get used to less growth from China.

In comments that appeared in line with the central bank's wait-and-see stance on monetary policy, Reserve Bank of Australia (RBA) Deputy Governor Philip Lowe also downplayed recent data that highlighted sharply slower growth.

Figures last week showed the economy grew just 0.2 percent in the second quarter, taking the annual growth rate down to 2.0 percent, well below the long-term average of 3.0-3.25 percent.

"The data for the June quarter suggest that the economy is continuing to grow at a similar rate to that of the past few years," Lowe told a lunch in Melbourne.

"Most other recent indicators are also consistent with a moderate expansion in the Australian economy. The missing ingredient continues to be a lift in non-mining business investment, where we are still waiting for convincing signs of a pick-up."

Lowe said annual growth could be closer to 3 percent if that were to occur. He also pointed to the country's "considerable ability to adjust", noting it had gone through a once-in-a-lifetime mining investment boom without overheating.

"We are now adjusting to the downside, while still managing to grow at a moderate rate. This is a significant achievement and is a testimony to the underlying flexibility of our economy."

Lowe said an important element in this flexibility is the exchange rate, which has fallen to its lowest in over six years against the U.S. dollar and on a trade-weighted basis.

"The exchange rate has now adjusted considerably... the depreciation is helping in the downswing," he said.

On China, Lowe said the Chinese authorities' handling of the stock market crash has led some to ponder the general direction of Chinese policy, including the likely pace of economic reform, an issue that bears close watching.

"We became used to extraordinarily strong growth in China and now we are having to get used to something a little less extraordinary."

Yet, Lowe pointed out the benefits of having deeper ties with an economy that is set to become the world's biggest at some stage.

"As a nation, we need to keep an eye on these opportunities, while, at the same time, understanding and managing the associated risks as best we can."

(Editing by Shri Navaratnam)

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