The Australian economy is now on a recovery path after emerging from one of mildest downturns on record, which has highlighted the nation's sensible macroeconomic policies and demand for the nation's resources from Asia, the central bank said.
However, policymakers now need to lay the platform for a long and stable upswing in the domestic economy, Reserve Bank of Australia (RBA) governor Glenn Stevens said on Thursday.
Speaking at the Melbourne Institute 2009 Economic & Social Outlook Conference dinner, Mr Stevens said it was not too early for policymakers to consider measures to support the medium-term health of the economy.
''The key question is: having had a fairly shallow downturn, how do we make the upswing long and stable, and relatively free of serious imbalances?'' he said in prepared remarks.
''At least part of the answer is that we will need to re-invest in the same policy discipline, and the same careful private-sector management, that paid dividends in the recent episode.''
Mr Stevens said many forecaster and policymakers were astounded by the turnaround in the Australian economy since consumer and business confidence bottomed earlier this year during the global economic crisis.
''As it turns out, in April we were pretty much at the nadir of sentiment about the Australian economy,'' he said.
''Six or seven months later, even most of the optimists are a little surprised, I suspect, at the economy's performance.''
Investment in the Australian economy would continue apace, particularly in the mining sector, with much of these funds likely to come from offshore, Mr Stevens said.
The nation's current account deficit would increase from the four to five per cent of gross domestic product (GDP) at present, but this would not be a negative for the economy if it was manageable and sustainable, Mr Stevens said.
''In fact a temporarily sizeable current account deficit, if characterised by equity-type capital inflow, may well be optimal, because it would mean that a good deal of the risk of the projects was being shared with foreign investors, and that makes sense,'' he said.
''Why would Australians alone take on all the risk of these massive projects?
''It is probably more sensible to share the risks with global capital markets and global companies.''
Mr Stevens said the Australian financial sector remained in decent shape, which was a benefit given the measures other national government had to take to support their local banks during the crisis.
Also, the federal government's balance sheet would not hinder the recovery in the domestic economy, he said.
''Public finances remain in shape, with a medium-term path for the budget back towards balance, and without the large debt burdens that will narrowly the options available to governments in other countries,'' he said.
''Sensible policy frameworks - both macroeconomic and microeconomic - remain in place, and they have worked.''
Australia's trade links to Asia would help continue the nation's economic growth for the following decades, Mr Stevens said.
''We remain open for trade and investment, with an exposure to Asia, which still has the most dynamic growth potential in the world over the next several decades.
''These advantages are already paying dividends.
''Properly exploited, they will pay many more.''
But Australia will continue to need to invest in ''all the things'' that helped it through the crisis.
''And we will need to accept and manage various changes that will probably confront us over the years ahead,'' he said.
AAP
