Asia’s emergence as the global economy’s engine of growth is boosting prices of food, energy and minerals and inhibiting recoveries from the U.S. to Europe, Reserve Bank of Australia Governor Glenn Stevens said.
“Prices are under upward pressure because of rising demand, but it is the demand coming from a couple of billion people in Asia seeking, and in many cases rapidly converging on, the way of life that the advanced countries have enjoyed for decades,” Stevens said in the text of a speech in London today. He didn’t directly address Australian monetary policy in the remarks.
Since the start of 2008, Asia excluding Japan accounted for about 70 percent of growth in global demand, compared with 30 percent from 2000 to 2007, Stevens said in remarks that contrasted growth in the Asia-Pacific region with slower gains in Canada, the U.S., the U.K. and euro area. He said demand from Asia is largely driving up global commodities.
“These price rises, not to mention those occurring most recently as a result of pressure on oil supplies, are quite unhelpful for the advanced countries, particularly those whose recoveries have been hesitant to date,” Stevens said.
The governor has raised Australia’s benchmark interest rate to the highest level in the developed world to contain inflation as a resource investment boom spurs employment growth and drives up the local currency.
“A very large increase in investment in the resources sector is under way and has a good deal further to run yet,” Stevens told the Australian Business in Europe forum today. A projected capacity expansion will see iron ore shipments double to about 2 million tons in four to five years, he said.
Coal Mining
Two coal-seam gas projects, expected to cost more than A$30 billion ($30.3 billion), are proceeding near the Queensland state port of Gladstone. Santos Ltd. (STO), Australia’s third-largest oil producer, and BG Group Plc, the U.K.’s third-biggest gas producer, will start hiring the first of more than 10,000 construction workers needed for the two projects later this year.
Australia is undergoing its biggest mining investment boom since the 19th century to meet rising demand for iron ore and coal from China and India. The RBA has boosted its benchmark interest rate seven times from October 2009 to November last year to 4.75 percent.
In his prepared remarks, Stevens noted that the recovery in Europe and the U.K. is “proving to be difficult and protracted,” in contrast to a “quite rapid” rebound in Asia.
Higher Commodities
“It is not at all clear that more demand growth in Asia is desirable at present,” Stevens said. “Global GDP growth has been strong, and prices for most commodities have been rising.”
The RBA’s 175 basis points of rate increases have driven Australia’s currency to parity with the U.S. dollar. In contrast, the U.S. Federal Reserve has kept its main interest rate near zero since December 2008.
Australian employers probably added 20,000 jobs last month, a March 10 report to be released in Sydney will show, according to a Bloomberg News survey of 20 economists. The nation’s unemployment rate held at 5 percent, according to the poll.
“Just recently, we have been experiencing growth close to trend, relatively low unemployment -- about 5 percent -- and moderate inflation, about 2.25 percent in underlying terms. In comparison with the experience of the past generation, that is a pretty good combination,” Stevens said.
For Australia, an exporter of iron ore and coal mined mostly from states in the country’s north and west, trade is propelling growth. Caution among the nation’s consumers and the highest savings in about two decades combined with a stronger currency are helping balance the economy, Stevens said.
Currency’s Rise
“The exchange rate is playing a role of helping the economy to adjust to the change in the terms of trade,” Stevens said, referring to a measure of income from exports. He said unlike other countries, Australia has the “good fortune” of higher savings along with rising incomes.
The RBA last month raised its forecast for 2011 growth to 4.25 percent, from a November prediction of 3.75 percent, when measured from the fourth quarter of 2010 to the final three months of this year.
Stevens last week held the benchmark rate for a third straight meeting. In testimony to a parliamentary panel last month, Stevens signaled little urgency about raising rates in the near term.
“We’re ahead of the game, which is where you want to be, and that’s the thing that affords you periods of sitting, waiting and watching,” he told lawmakers in Canberra on Feb. 11. “Sometimes, they can be reasonably lengthy periods.”
Source: www.bloomberg.com
“Prices are under upward pressure because of rising demand, but it is the demand coming from a couple of billion people in Asia seeking, and in many cases rapidly converging on, the way of life that the advanced countries have enjoyed for decades,” Stevens said in the text of a speech in London today. He didn’t directly address Australian monetary policy in the remarks.
Since the start of 2008, Asia excluding Japan accounted for about 70 percent of growth in global demand, compared with 30 percent from 2000 to 2007, Stevens said in remarks that contrasted growth in the Asia-Pacific region with slower gains in Canada, the U.S., the U.K. and euro area. He said demand from Asia is largely driving up global commodities.
“These price rises, not to mention those occurring most recently as a result of pressure on oil supplies, are quite unhelpful for the advanced countries, particularly those whose recoveries have been hesitant to date,” Stevens said.
The governor has raised Australia’s benchmark interest rate to the highest level in the developed world to contain inflation as a resource investment boom spurs employment growth and drives up the local currency.
“A very large increase in investment in the resources sector is under way and has a good deal further to run yet,” Stevens told the Australian Business in Europe forum today. A projected capacity expansion will see iron ore shipments double to about 2 million tons in four to five years, he said.
Coal Mining
Two coal-seam gas projects, expected to cost more than A$30 billion ($30.3 billion), are proceeding near the Queensland state port of Gladstone. Santos Ltd. (STO), Australia’s third-largest oil producer, and BG Group Plc, the U.K.’s third-biggest gas producer, will start hiring the first of more than 10,000 construction workers needed for the two projects later this year.
Australia is undergoing its biggest mining investment boom since the 19th century to meet rising demand for iron ore and coal from China and India. The RBA has boosted its benchmark interest rate seven times from October 2009 to November last year to 4.75 percent.
In his prepared remarks, Stevens noted that the recovery in Europe and the U.K. is “proving to be difficult and protracted,” in contrast to a “quite rapid” rebound in Asia.
Higher Commodities
“It is not at all clear that more demand growth in Asia is desirable at present,” Stevens said. “Global GDP growth has been strong, and prices for most commodities have been rising.”
The RBA’s 175 basis points of rate increases have driven Australia’s currency to parity with the U.S. dollar. In contrast, the U.S. Federal Reserve has kept its main interest rate near zero since December 2008.
Australian employers probably added 20,000 jobs last month, a March 10 report to be released in Sydney will show, according to a Bloomberg News survey of 20 economists. The nation’s unemployment rate held at 5 percent, according to the poll.
“Just recently, we have been experiencing growth close to trend, relatively low unemployment -- about 5 percent -- and moderate inflation, about 2.25 percent in underlying terms. In comparison with the experience of the past generation, that is a pretty good combination,” Stevens said.
For Australia, an exporter of iron ore and coal mined mostly from states in the country’s north and west, trade is propelling growth. Caution among the nation’s consumers and the highest savings in about two decades combined with a stronger currency are helping balance the economy, Stevens said.
Currency’s Rise
“The exchange rate is playing a role of helping the economy to adjust to the change in the terms of trade,” Stevens said, referring to a measure of income from exports. He said unlike other countries, Australia has the “good fortune” of higher savings along with rising incomes.
The RBA last month raised its forecast for 2011 growth to 4.25 percent, from a November prediction of 3.75 percent, when measured from the fourth quarter of 2010 to the final three months of this year.
Stevens last week held the benchmark rate for a third straight meeting. In testimony to a parliamentary panel last month, Stevens signaled little urgency about raising rates in the near term.
“We’re ahead of the game, which is where you want to be, and that’s the thing that affords you periods of sitting, waiting and watching,” he told lawmakers in Canberra on Feb. 11. “Sometimes, they can be reasonably lengthy periods.”
Source: www.bloomberg.com
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