RBA Members Warns Rudd of Debt Risks

May 15, 2009 – 2:34 PM (Sydney Time)

Reserve Bank Member, Roger Corbett

Earlier today Roger Corbett has specificallt stated that Australia was very fortunate to have close business ties with China but that the Australian Government should not allow the budget deficit to grow too much.

Mr. Corbett said,”We are a very lucky country in Australia if we manage our destiny well – allowing us to sink too far in defecit is not going to be helpful in that process. While there have been some benefits from the Australian Government’s $900 payments earlier this year, spending money on the infrastructure was a better way to stimulate the economy.”

He stated,”The Chinese are reflecting their economy and we are seeing now a first type of turn in that economy reflected also in Taiwan, Korea and other Asian Countries.”

Mr. Corbet stated in his statement that the amount of stimulus in the global economy was now significant with many central bank official cash rates at or near zero and that the potential for inflationary pressures to build was growing. 

“The things that are happening internationally hae got inflation written all over them, particularly in America. In Australia, of course when you set expansionary policy you lay the ground for the next movement or when demand exceeds supply..but when you are at the bottom of the cycle as we are, then you have a lot of corrective opportunities to fix that before you get to the peak.”

(source: www.theaustralian.news.com.au)