Things “will be difficult” over the next year, but Reserve Bank Governor Glenn Stevens believes the Australian economy will emerge from the global crunch in better shape than many other countries.

He made it clear the bank sees Australia taking a hit, but: “We have claimed all along that Australia was better positioned than many countries to ride out the international difficulties.”

Mr Stevens told the House of Representatives Economics Committee in Canberra said this morning: “We are being affected by the global downturn, and cannot realistically expect other than weak conditions in the first part of 2009. 

But in his first of two appearances of the year before the House of Representatives Economics Committee in Canberra, Mr Stevens made it clear the bank thought things were not as grim as some might say or think.

“Things will be difficult over the next year … the long-run prospects for Australia have not deteriorated by as much as we may all be feeling just now. China’s emergence, for example, has not finished. We are being affected by the global downturn, and cannot realistically expect other than weak conditions in the first part of 2009.

“There are reasonable grounds at this stage to think that the Australian economy will come through this very difficult episode — certainly not unscathed, but well placed to benefit from a renewed expansion.

The Governor’s confidence about Australia is in very stark contrast to the sentiments reported in yesterday’s Crikey on the US fed’s key Open Markets Committee where some members worry that the US economy will be sluggish for the next four to six years as it struggles to return to its long term levels of growth, inflation and employment. And, overnight, the Deputy Governor of the Bank of England warned that the UK central bank was fighting to stop the country from toppling into a decade long depression.

“Bank of England Deputy Governor John Gieve said policy makers are fighting to protect Britain from the threat of a decade-long depression similar to that suffered by Japan in the 1990s,” Bloomberg reported.

Peter Fray

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