Café and restaurant owners in Melbourne and Sydney can rest easy. They’re not missing out on the benefits of the mining boom.
The Reserve Bank’s Philip Lowe used his maiden speech as deputy governor yesterday to point to “a chain that links the investment boom in the Pilbara and in Queensland to the increase in spending at cafés and restaurants in Melbourne and Sydney”.
Day-to-day the transmission mechanism could be hard to see.
“It starts with the high terms of trade that have pushed up the Australian dollar,” Dr Lowe told the Committee for Economic Development of Australia. “In turn, the prices Australians pay for many manufactured goods are, on average, no higher than they were a decade ago, despite average household incomes having increased by more than 60 per cent.”
“The stable prices for many goods, combined with strong disposable income growth means there is more disposable income to be spent on services in the cities and towns far from where the resources boom is taking place.”
At the same time the high dollar was hurting the manufacturing, tourism and education sectors, as well as some parts of agriculture and more recently some business services sectors.
The net effect was hard to judge... The Bank was “carefully examining every piece of data that comes in for insight”.
Asked whether the mining boom would be transitory, leaving Australian industry hollowed out, Dr Lowe said he could make a plausible case that the mining boom would be “very long-lasting”.
“The process of development of those very large and populous countries of Asia is going to take many many decades and Australia has the resources to supply those needs over many decades. If that is the case, the Australian economy has to go through some structural adjustment and it will be quite long lasting.”
“My sense is that from an overall perspective we are not losing the skills that that will make us competitive in the medium term.”
Moves by the big banks to push up interest rates independently of the Reserve did not threaten its ability to wield monetary policy. It targeted the overall level of rates charged rather than its cash rate and could keep adjusting the cash rate until it got the overall level it wanted.
By and large Australia was well served by the media in its reporting of economic issues. But reporting on Asia was not as strong as it should be. Second-tier data out of the United States was “breathlessly reported” but Chinese industrial production data was hard to find.
In today's Canberra Times, Sydney Morning Herald and Age
RBA Speech by Philip Lowe - 16 February 2012
. We're richer than ever, richer than the US - Gregory on the mining boom
. Extraordinary. The boom is spreading job prospects more evenly - Gruen
. Mining has jumped the shark, passed the point where it helps - study