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'Animal spirits' returning: RBA boss


Like his predecessor, Reserve Bank governor Philip Lowe is a glass half full kind of guy.

But he's nothing like Ken Henry, the former Treasury chief who is decidedly pessimistic about the economic outlook.

While there are still plenty of risks in the world economy, Dr Lowe believes it is in better shape than it has been for some time.

The "animal spirits" of the business world which have been missing for quite a while "might just be starting to come back", he told the Crawford Australian Leadership Forum at the Australian National University in Canberra on Monday.

Dr Lowe expects economic growth in Australia will be a bit stronger over the next couple of years.

"The pick-up in the global economy is helping us," he said.

Dr Henry, chairing a panel discussion, made some comparisons between the economy in 1983 when the Hawke Labor government came to power and now.

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Unemployment then was 10 per cent, compared with 5.5 per cent today; inflation was 11.5 per cent versus around two per cent in 2017; the economy was in a deep recession with a growth rate of minus 3.5 per cent whereas it is 1.7 per cent now, albeit low by historical standards.

Furthermore, Australia's terms of trade have grown 45 per cent since 1983.

"It all sounds pretty good, so why is it ... I am much more pessimistic than I ever was in 1983?" said Dr Henry, now chairman of the National Australia Bank.

Former New Zealand prime minister Helen Clark said globalisation had not worked to the benefit of many people and nations.

That situation could not be left to market forces alone.

"I think we need very clear public policies to be able to support people to adapt to what is happening in their economy," Ms Clark contributed to the discussion.

While people voted for Brexit and Donald Trump, she does expect a rush of jobs in the rust belt of America or the mining towns of the UK.

"There is a huge jobs deficit," Ms Clark said.

Dr Lowe disagreed there was jobs crisis given unemployment in the four big Western economies - the US, Germany, the UK and Japan - was at its lowest level in many decades.

"The crisis really is in real wage growth," he said.

Foreign Minister Julie Bishop highlighted the impact of new technologies on the economy, and even on the archaic world of foreign affairs.

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"I'm as likely to text my counterpart or tweet a foreign policy, as I am to read a cable or hold a press conference to announce the change in policy," she said in her opening address to the conference.

Later former director-general of the World Trade Organisation Pascal Lamy said he was disappointed Ms Bishop hadn't mentioned the need for a price on carbon.

"I'm sure the only reason the foreign minister didn't mention it, is because it is so obvious," Dr Henry quipped.