GLENN STEVENS: Monetary policy is still powerful

RBA Governor Glenn Stevens / Getty

RBA Governor Glenn Stevens is in Canberra giving the House of Representatives Economics Committee an update on the economy.

In his prepared remarks, before the fun stuff when the committee gets to ask questions, he introduced a discussion on the consumer and monetary policy in Australia. Stevens said:

The Board is also very conscious of the possibility that monetary policy’s power to summon up additional growth in demand could, at these levels of interest rates, be less than it was in the past. A decade ago, when there was, it seems, an underlying latent desire among households to borrow and spend, it was perhaps easier for a reduction in interest rates to spark additional demand in the economy. Today, such a channel may be less effective. Nonetheless we do not think that monetary policy has reached the point where it has no ability at all to give additional support to demand. Our judgement is that it still has some ability to assist the transition the economy is making, and we regarded it as appropriate to provide that support.

That’s as close as you get to an admission of further cuts from the RBA as you’ll get from the normally reserved Stevens.