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Don t blame miners for two-speed economy: RBA
Don't blame miners for two-speed economy: RBA

It's not fair to blame the mining boom for the all of weakness of those sectors stuck in the slow lane of the multi-speed economy, Australia's top central banker says.

In a speech in Adelaide, Reserve Bank of Australia governor Glenn Stevens acknowledged that the mining sector was crimping other parts of the economy by drawing away labour capital and pushing the exchange rate up.

"It is doing that. But slower growth in sectors that had earlier done well from unusually strong gains in household spending would have been occurring anyway, even if the mining boom had never come along," he said.

Mr Stevens said there had been an extraordinary period prior to 2007 when household wealth rose strongly - mainly due to rising housing prices - and savings out of household income fell to very low levels.

But that all changed around 2007, the year the global financial crisis began.

Savings - which in economic terms includes debt repayments - picked up and consumer spending per head at first contracted then resumed growing, but at a slower rate than before.

"But this sort of growth is, in fact, quite comparable with the kind of growth seen in the couple of decades leading up to 1995."

These "circumspect, but more typical" trends in household saving and spending had been reinforced by slower growth in the prices of assets, both housing and shares, Mr Stevens said.

"But this would, as I say, have occurred with or without the mining boom.

"In fact, without the mining boom and its spillovers, we would have been feeling the effects of those adjustments rather more acutely than we do now," he said.

Household wealth was now about where it was five years ago but at some point would begin to increase again.

People were now saving a reasonable amount from their incomes and investing it, he said.

"That is, they are building wealth the old fashioned way," he said.

And, while the course of asset prices over the short term was unpredictable, he said, "wealth will surely resume an upward track, sooner or later".

The West Australian

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