Australia should not be foolish in thinking it is going to...

Australia should not be foolish in thinking it is going to continue having uninterrupted economic expansion, RBA governor Glenn Stevens says, warning that a downturn would happen eventually.

Mr Stevens said the country was "building up this myth of 22 years of uninterrupted growth" and that sooner or later, there was a "probability of ... more or less 100 per cent" that a downturn would happen.

"We would be foolish to think that we have found the secret of completely eliminating the cycle, because we haven't," Mr Stevens told The Wall Street Journal.

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"But if we are sensible and prudent and just a bit lucky, we can have cyclical downturns that are not so deep. It is the deep ones that are damaging. It is the deep ones that cast a long shadow on unemployment for years after."

Mr Stevens, who together with other Reserve Bank officials has jawboned on the need for a lower exchange rate in recent weeks, declined to speak further on the Australian dollar.

He said there were reasons to be optimistic about the future, but there was a need to foster innovation and productivity.

"We have to do better on output per hour," Mr Stevens said. "You can have real income per head rising without productivity if the terms of trade keep rising. That's not going to happen now. That's finished."

He added that "as a country, we have to get it. It doesn't just land here in our lap."

The International Monetary Fund said in November that labour productivity in Australia needed to rise significantly to maintain the historical growth in living standards. The Treasury's chief economist David Gruen also warned that income growth was set to grow at a "significantly slower" pace over the next decade than in the past half a century.

Mr Stevens said in response to questions on China that Australia needed to become more aware of the full implications of the country's economic cycles.

"I think there are issues for economic policy in general there - how we manage that across the cycle, and how we think about it," Mr Stevens said of Australia's largest trading partner.

"But that's not a reason not to engage with China, because it is still enriching us. But we ought to do so in a way that recognises that the fluctuations that they experience, we will feel them."
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with the USA quantative easing, looming to be diminished or removed considering the booming rises in the DOW and the usa unemployment improving -
Glen Stevens Gov. of the aust. reserve bank warning that a downturn in Australia is inevitable, huge govt. debt.
Watching companies like forge and QBE. Miners, and others-
Metcash has been falling while its "cum" dividend.
These Times with Companies announcing poor results and interest rates being tipped to rise next year, it might be time to be cautious and cash up a bit and cop 4.5% in bank interest for a while. at least its better than losing half your money.
you cant trade shares if your broke.