Glenn Stevens’ Hobart speech was as good a summary of Australia’s economy as you can get.

Glenn Stevens’ Hobart speech was as good a summary of Australia’s economy as you can get. Photo: Angus Mordant

It would be very silly indeed to think the full story on anything remotely as complex as the economy could be told in a series of near-instant headlines, each containing much less information than a tweet.

But that’s what happened last week with the Reserve Bank governor’s speech in Hobart.

By the wonder of technology and the grace of the modern news cycle, a carefully considered document of nearly 3,800 words was rendered into a barely recognisable market shorthand of the RBA smashing the currency and warning of a housing price dive.

Illustration: Spooner

Illustration: Spooner

The perception that governor Glenn Stevens was out and about, jawboning the Aussie, knocked a cent off the currency in no time flat, while daring to repeat his warning that house prices rise and fall fuelled property commentary for days thereafter.

The irony is that the “hot” bits of Stevens’ speech were in the context of the RBA’s efforts to communicate very clearly with the markets.

Stevens was basically clarifying what everyone in the RBA-watching industry should have already known.

Much of the housing commentary was particularly bemusing as, with the exception of an observation about Sydney property investors, the overall tone of Stevens’ observations about the Australian housing market was calm.

Lending for housing hadn’t become silly, prices seemed to be steadying a touch and, if the present trends hold of increased building and modest price rises, it would be a very nice thing for all.

Don’t miss the good news

That’s why speeches by RBA heavyweights are worth reading in full, as can be easily done on the bank’s splendid web site, RBA.gov.au. Stevens’ Hobart effort was as good a summary of Australia’s economic outlook as you can get, but you don’t get that from the usual scary bits that most attract journalistic and market attention.

And by reading the source document, you also don’t miss out on the good news that tends not to attract eyeballs the way bad news does.

A particular case in the Hobart speech was Stevens recording the very pleasing lift we’re witnessing in labour productivity. Much of the more doctrinaire commentary around the place, especially from the right and business groups, is well out of date on productivity.

As the accompanying graph from Stevens’ speech shows, the nation’s labour productivity has lifted nicely, back up to 2 per cent per annum overall.

The mining industry is leading that charge but the anecdotal evidence is that non-mining workplaces are catching up.

And, as previously reported here, my guess is that the official figures are lagging the reality of what is happening in Australian enterprises.

The existing score was enough to please Stevens:

“Meanwhile, the environment seems likely to be one in which a number of sectors are making serious efforts to contain costs and lift productivity. That amounts to an outlook for wages and prices that does not appear to threaten the inflation target, even were we to see a somewhat lower exchange rate.

“Perhaps more fundamentally, a better trend for productivity, if we can sustain it – and especially if it can be further improved – would be a reliable basis for optimism about the longer-run prospects for the economy and our living standards. “

That’s all rather important – but it doesn’t make for a scary headline and won’t instantly move a market.

Michael Pascoe is a Business Day contributing editor.

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