Australian growth: Monetary policy and export demand

RBA's Malcolm Edey confident in China, India growth
Allison Jackson February 18, 2009 The Australian
CHINA and India would continue to grow at a fast pace for a "long time", boosting demand for Australian raw materials.Reserve Bank assistant governor of economics Malcolm Edey said today China and India had “long way to go” before they caught up to industrialised countries. “China and India … until the recent crisis were growing at extremely high rates. They have got plenty of scope to do that for a long time,” Mr Edey told a business forum in Sydney. Mr Edey said demand for Australian resources would continue to grow “which is going to be very good for Australian incomes”, and would help offset the impact of an aging population on economic growth. “China and India and other parts of the developing world have a long way to go to catch up and as they catch up they are becoming a bigger and bigger part of the world and that’s a very powerful influence in increasing global growth prospects,” he said. “I think that force will continue to operate in the long run, but we are seeing very severe short-term effects from the global financial crisis working against that at the moment.” China ranks as Australia’s biggest trading partner, while India’s importance has grown in recent years. India is now Australia’s 11th biggest trading partner, according to the Department of Foreign Affairs and Trade website. Mr Edey reiterated the Reserve Bank’s view that Australia would continue to outperform other industrialised nations “in the difficult period that lies ahead” due to the strength of the domestic financial system. Mr Edey provided no clues on the RBA’s attitude towards interest rates since its last board meeting on February 3. At the meeting, the RBA board cut interest rates by another 100 basis points, taking rates to a 45-year low, and signalled it was near the end of the easing cycle. But since then the economic situation has deteriorated even further, with Japan, Australia’s biggest export market, experiencing the worst economic conditions since World War II and Australia’s unemployment rate at the highest level since June 2006 while business and consumer confidence are in the doldrums. Market participants are hoping RBA governor Glenn Stevens will provide some clarification on the central bank’s strategy when he testifies before federal parliament on Friday.
It offers some Australians a little hope when we hear continued talk about increasing demand for Australian exports underpining better economic conditions than other parts of the globe, however, which sectors will most benefit from this continued demand?
On a slightly different tangent: is it reasonable to expect the RBA to continue adjusting rates, or should they be a little cautious and 'wait and see' the effects on the recent and significant movements?