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Thumbnail Australian Economy
Stream Professional Services
Title Australian Economy
Read Time 2 minute(s)
Introduction ... Australian resources industry was more promising than the negative short-term picture might suggest
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Australian economy in a good place

Australia is in a good place to weather difficult economic conditions, but interest rate settings alone will not solve major financial problems, a former English central banker says.

Former Bank of England Governor Lord Mervyn King says a downturn in China would hurt Australian economic growth, but the chances of that happening are unlikely.

"All in all, Australia is a pretty good place to be," Lord King told the Diggers and Dealers mining conference in Kalgoorlie.

The outlook for the Australian resources industry was more promising than the negative short-term picture might suggest, he said.

"The world economy may come back faster than we think," Lord King said.

But a recovery will need more than low interest rates.

"There's been a succession of easing measures which have temporarily boosted demand but not restored the rebalancing which is needed for a sustainable recovery," he said.

"Ultimately governments will realise they need to play their part.

"Far too much is expected of central banks today.

"People need to realise that central banks aren't the only game in town."

He said equity and commodity markets would be well supported by low interest rates, and an uncertain geopolitical environment would help support commodity prices.

Paying down government debt was one of the great challenges for resources-dependent nations such as Australia, Lord King added.

Norway had been the most successful resources economy to deal with this by establishing a sovereign wealth fund, he said.

However, as countries around the world looked to boost domestic demand they could act to weaken their exchange rate at the expense of other nations.

A coordinated approach was need to ensure economies, including China and the United States, did not artificially weaken their currencies, Lord King said.

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