Reserve Bank gives economy a tick

Opposition Leader Tony Abbott doesn't believe that unemployment would be higher
without economic stimulus, but a Nobel prize winning economist says Labor did a
"fantastic" job during the crisis.
The latest claims and counter claims over the stimulus came as an upbeat appraisal
of the economy by the Reserve Bank suggested the central bank will keep official
rates on hold for sometime - long after the August 21 federal election is settled.
Mr Abbott said he did "not accept" Labor's belief that there would have been more
people out of work if not for its $42 billion stimulus, and that there was a wealth
of economic experts to say that the stimulus was not well managed.
These included Reserve Bank board member Warwick McKibbin, who described the
stimulus as "a panicky move", he said.
The government has said the stimulus saved 200,000 jobs, which Mr Abbott calculated
at $250,000 per job.
"All of us want to save jobs, but you have got to ask yourself the question, did it
really need $250,000 per job," he told reporters while campaigning in northern
Tasmania.
He also cited Reserve Bank governor Glenn Stevens as saying it was more of a North
Atlantic financial crisis than a global one, except for the six to eight weeks of
late 2008 when the banking system was under serious strain.
"The interesting thing about the second ($42 billion) stimulus package ... it's
basically slated to last longer than the First World War to deal with a crisis that
lasted six to eight weeks," he said.
But Professor Joseph Stiglitz, a former World Bank chief economist and economic
adviser to the US government, said Labor did a "fantastic job" of saving Australia
from the global crisis.
Prof Stiglitz also criticised right-wing politicians for being the "architects" of
the downturn that designed America's "economic mess".
"Whereas the others (Labor) actually did a fantastic job of saving your country from
problems," he told AAP while visiting Sydney.
Prime Minister Julia Gillard seized on the professor's comments as she faced
questions about an interim report on her $16.2 billion Building the Education
Revolution program - a program the coalition has criticised for its "extraordinary
waste and mismanagement".
Mr Gillard quoted Prof Stiglitz as saying there would have been waste without the
stimulus.
"The waste would have been the fact that the economy would have been weak," she told
reporters while campaigning in Melbourne.
"You would have had high unemployment, you would have had capital assets not fully
utilised - that's waste.
"So your choice was one form of waste versus another form of waste. It's judgment of
what is the way to minimise waste, no perfection here, and what your government did
was exactly right."
In its quarterly monetary policy statement, the Reserve Bank of Australia (RBA) said
the economy has been growing around its average pace, partly due to a strong
contribution from government investment.
"Over the period ahead, public investment is set to decline as the various stimulus
projects are completed, but a strengthening in private demand, particularly business
investment, is expected," the RBA said.
It said the official cash rate of 4.5 per cent, where it has been since May, was
"appropriate at this stage".
It largely kept its economic forecasts unchanged from three months ago, expecting
key underlying inflation to stay at 2.75 per cent out to the end of next year and in
the top half of its two to three per cent target.
"These forecasts mean that the RBA can now remain comfortably on hold for the time
being," NAB Capital chief economist Rob Henderson said on Friday.