RBA governor Glenn Stevens sets out case for next rate rise, which could be in August

SOFTNESS in the economy is unlikely to stop the Reserve Bank from lifting rates, with governor Glenn Stevens flagging the bank's August board meeting could bring the next increase.

THE current softness in the economy is unlikely to stop the Reserve Bank from lifting rates, with governor Glenn Stevens flagging that the bank's August board meeting could bring the next increase.

Although unemployment was not as low now as it was in early 2008, he said there was little spare capacity in the economy in comparison with the size of the resources boom under way, The Australian reports.

“The proverbial pet-shop galah can by now recite the facts on Australia's trade with China,” Mr Stevens told the Economic Society of Australia in a lunchtime address in Brisbane.

Mr Stevens said the boost to export prices from Chinese demand represented an increase in national income of more than 15 per cent.

“Even allowing for the fact that a substantial fraction of this income accrues to foreign investors that own large stakes in many of Australia's resources companies, this represents a very large boost to national income.

“These expansionary forces are at work on an Australian economy that was widely regarded as very fully employed by early 2008, and that experienced only a fairly mild and short downturn thereafter.”

Read more on this story at The Australian.