The speech assesses current global economic conditions before examining the outlook for a number of countries, including Australia, in more detail. Monetary policy is discussed from both a global and domestic perspective and the speech underlines the need for other conditions – in addition to monetary policy – to be present to support sustainable growth. In this context, the commitment of G20 countries to raise the level of world GDP growth by an additional 2 per cent and the ‘politically demanding’ measures this may require are discussed.

The speech begins by noting that global economic growth in 2014 is expected to be a ‘bit higher’ than in 2013, at about average pace. The economic outlook of the United States, the euro zone and the Asian region are then examined more closely. Turning to the local economy, the speech suggests that Australia withstood the global financial crisis ‘well’ but acknowledges that economic growth has been running at bit below trend for about 18 months. To keep overall growth on the right track, the speech explains how other sources of growth will need to strengthen as mining investment declines. It highlights ‘encouraging early evidence’ that the handover from mining-led demand growth to broader private demand growth is beginning, helped by very low interest rates. But it notes the challenges and uncertainties involved in trying to ‘fine-tune’ a smooth handover. In assessing the wider economic outlook, the speech suggests that economic growth may strengthen a little throughout 2014 and pick up further in the following year.

Looking at some of the potential risks to the economic outlook, the speech highlights trends in asset prices as an area to watch, noting the strong rise in housing prices. It reiterates that ‘house prices can go down as well as up’ and underlines the need to maintain high lending standards. Other risks to the outlook are examined, including the exchange rate and the Chinese economy.

Returning to the global perspective, the speech emphasises that sustainable growth is dependent on more than just monetary policy and outlines other conditions which are needed to support growth, including competition, innovation and investment. Against this background, the G20 GDP growth target is discussed, with recognition that whilst the required measures may be challenging, the work will have been ‘worthwhile’ if it helps to ‘galvanise’ efforts for the required reforms.

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