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Australia's economy, which recently entered into a new upswing, will see the growth extending for a few more years yet, the Reserve Bank of Australia's Deputy Governor Ric Battellino said Wednesday.
Speaking at the 6th National Housing Conference, Battellino said the Australian economy has held up better than estimated earlier this year, and was the only developed economy, where 2009 GDP growth remained positive during the past year.
The deputy governor noted that global economy was recovering, boosted by Asian economies. "This is positive for Australia as Asian countries are our major trading partners", he said. "While the world economy as a whole is forecast to remain relatively sluggish next year, economic growth for the group of countries that comprise our major trading partners is expected to recover to a relatively normal pace".
But Battellino noted that although there was doubt about the capacity of Asian economies to grow if the developed economies of the Northern Atlantic remained weak, many economies including China showed stronger growth boosted by domestic demand.
Meanwhile, reflecting greater demand for resources, Battellino said the Australian resource sector would expand further over the next few years, including the development of a few large gas projects. Further, mining investment, which was already at record levels as a share of GDP, could rise substantially over the next five years or so, he said.
Commenting on the housing market, Battellino pointed out that one of the main challenges was the lack of supply of houses, but said this was not due to a lack of investment in housing. In fact, investment on dwellings was higher at 6% of GDP, he said. The apparent contradiction was mainly because a higher proportion of the investment was going into improving quality of existing homes and building accommodations, in addition to primary residences, the deputy governor noted.
"If as a nation we want to continue to do this, while at the same time providing enough dwellings for the growing population, the overall amount of dwelling investment undertaken will need to increase relative to GDP", he noted.
Battellino said the ratio of house prices to income for Australians appeared to be relatively high compared to the United States, as the Australians seemed to spend less of their income on non-housing consumption than is the case for US households. "The experience of the last few years suggests that the Australian household sector as a whole appears to have the financial capacity to sustain a relatively high ratio of housing prices to income", he said.
Also, Battellino believed that the housing credit, which was growing at an annual pace of 7-8%, was more than adequate to fund new investment in housing that is needed.
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