Royal Bank of Australia's Governor Glenn Stevens stated in yesterday's speech that the government has to increase spending in order to boost demand as the economy has to grow at a faster pace. Monetary policy, at the current level of interest rates, has become more limited in spurring demand compared to a decade ago but still has some ability to assist the economy.
The bank cut interest rates this month to 2.25% after a 17-month pause as unemployment has risen to a 12-year high. Australia's economy faces challenges as prices for commodities, the most important export, slumped and China's economic growth slows. China is Australia's biggest trade partner.