Glenn Stevens reckons Australia can navigate the collapse of the mining boom without a recession

RBA Governor Glenn Stevens has this morning delivered his opening remarks to the House of Representatives Standing Committee on Economics.

As you’d expect he discussed the outlook for the US economy and the Fed’s move toward raising rates. He’s discussed the slowdown in Chinese growth and the impact that the bursting of the Chinese stock market bubble has had on stock market valuations around the world.

He’s also talked about the dip in capex now that the mining boom has ended and noted that Australia is about half way through an adjustment that will equal around 5% of GDP.

But he has highlighted that domestic growth has improved, even if its is still not as fast as the RBA would like. Stevens highlighting that employment has grown “200,000, or about 2 percent” over the past year and said the Aussie dollar is doing its job.

It’s the usual stuff you’ve heard from him before.

But he has succinctly summarised where Australia is in its economic transition. It’s a good story, he says.

For Australia, we cannot, of course, determine our terms of trade or other forces in the global economy. We can only adjust to them. The record of adjustment in recent years is good. We negotiated the financial crisis without a major financial crisis of our own or a big downturn in economic activity. We negotiated the first two phases of the resources boom without major inflationary problems, and are part way through our adjustment to the third phase – so far without a major slump in overall economic activity. There is still a pretty good chance that we will come out of this episode fairly well, and much better than we came out of previous episodes of this type.

Clearly the governor sees very little chance of a recession in Australia.

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