RBA Chairman Glenn Stevens has told a Federal Government committee hearing that household spending continues to remain low in the wake of dropping consumer confidence and global economic uncertainty.

 

Mr Stevens told a House of Representatives Standing Committee on Economics that despite an historical precedence of high spending to saving ratios, the average household was beginning to tighten their spending patterns.

 

"In my judgment, it is increasingly clear that we are seeing a significant change in household behaviour," Mr Stevens told the committee.

 

Mr Stevens said that households were beginning to keep their debt levels more or less in line with growth in household income. He also cited that growing uncertainty in regards to European sovereign debt was beginning to have an impact on consumer confidence.

 

However, Mr Stevens was upbeat in his evaluation of the country's ability to deal with any future global economic downturns, citing strong terms of trade and low unemployment rates. He also said that strong growth prospects in Asian markets, particularly that of China, remained strong and would serve Australia well in the coming years.  

 

Mr Stevens expressed his confidence in the country's financial institutions, lauding both domestic banks and the strong Australian dollar.

 

"Our banks are strong, our currency is sound and our sovereign credit position is in the international top tier," Mr Stevens said.

 

Mr Stevens speech to the committee comes as the retail sector faced the biggest drop in consumer spending in the last 50 years.

 

"Consumer caution, while making life hard for the retail sector, is also building resilience in household balance sheets. If we're entering another period of weaker international conditions, this is a pretty good starting point from which to do so."

 

Mr Stevens also took the opportunity to comment on the state of global and local productivity declines, saying that the country had to be more proactive in ensuring productivity growth.