SYDNEY: Demand from rapidly developing Asia is propelling a price rise that will hamper the global economic recovery in advanced countries, Australia's reserve bank chief has warned. The bank's governor Glenn Stevens said Asia's rise was "changing the shape of the world economy", and doing so more quickly than had been expected. He told an audience in London that upward pressure on prices came from "a couple of billion people in Asia seeking, and in many cases rapidly converging on, the way of life that the advanced countries have enjoyed for decades.
"These price rises, not to mention those occurring most recently as a result of pressure on oil supplies, are quite unhelpful for the advanced countries, particularly those whose recoveries have been hesitant to date." In the Wednesday speech, he said the rises amounted to a "supply shock" for advanced countries, "someone else's demand has pushed up the price at which markets are prepared to supply energy, agricultural and resource commodities".
"That will make it harder to engender a strong recovery in the advanced countries." He said the price rises would also be unwelcome for very poor countries whose populations spend much of their low incomes on food. In addition, he said there was a danger that price pressures could intensify if demand in advanced countries grows faster. Stevens said a strong Asian recovery from the global downturn had also helped Australia, which needed to do a better job of managing its trade and investment booms.
"Historically, Australia has often not managed periods of prosperity conferred on us by global trends terribly well," he said. But he added that the exchange rate was helping the national economy adjust to the current high levels of terms of trade, led by resource exports. He also said households were being more cautious about running up debt and spending money as incomes rise.
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