For the third time this year, Reserve Bank Governor, Glenn Stevens, has attempted to give Australia and Australians a sense of what has to be done to "make sure that the road to recovery will connect to the road to prosperity," as he put it last night in a speech in Melbourne.
His speech last night laid out the benefits that lie ahead if we get it right, but didn’t try to avoid the considerable obstacles that we face.
But he was optimistic, making the point that if we learned from the reasons why we were not (so far) badly damaged by the global crisis, we can succeed.
Mr Stevens again mentioned his previously-stated fears that property and housing prices could become a problem, along with labour shortages, uneven development patterns in the economy and huge current account deficits.
There was no mention of interest rates or the dollar, but both were there, in the background, especially when he discussed the challenges coming in the wider economy from a new resources surge.
It was against that background that he last night gave the third of a trio of major speeches this year looking at our economic condition.
They started in April with a look at The Road to Recovery, with the issue then was how to get onto that road:
In late July, with the country’s return to that road safely assumed, he spoke about The Challenges to Economic Policy, in Sydney, with some comments on property and housing that still resonate:
"A very real challenge in the near term is the following: how to ensure that the ready availability and low cost of housing finance is translated into more dwellings, not just higher prices.
"Given the circumstances – the economy moving to a position of less than full employment, with labour shortages lessening and reduced pressure on prices for raw material inputs – this ought to be the time when we can add to the dwelling stock without a major run-up in prices.
"If we fail to do that – if all we end up with is higher prices and not many more dwellings – then it will be very disappointing, indeed quite disturbing.
"Not only would it confirm that there are serious supply-side impediments to producing one of the things that previous generations of Australians have taken for granted, namely affordable shelter, it would also pose elevated risks of problems of over-leverage and asset price deflation down the track."
That was construed as a warning that the RBA would not let a housing bubble develop: something Mr Stevens has pointed out was not the purpose of his comments. He was talking about the dangers to the wider community of allowing a property and housing price explosion to go for too long.
And last night in the third of his major speeches, there was more in a similar vein: "there is no such thing as effortless, or riskless, prosperity," he told his Melbourne audience.
"There is still a business cycle, and we do well to remember that even if we have been spared the worst of the recent downturn.
"We will need to continue investing in all the things that helped us get through the recent episode.
"And we will need to accept and manage various changes that will probably confront us over the years ahead. The road to prosperity will have some bumps, twists and turns.
"But it is the road to the right destination."
But before we get there, he said had to have a good appreciation of what needs to be done in the wake of our surviving the GFC and Great Recession
"The key question is: having had a fairly shallow downturn, how do we make the upswing long and stable, and relatively free of serious imbalances?" Mr Stevens asked.
"At least part of the answer is that we will need to re-invest in the same policy discipline, and the same careful private-sector management, that paid dividends in the recent episode.
"That means keeping tested frameworks in place, amended as necessary in the light of experience.
"It means unwinding temporary measures as appropriate. It means keeping a focus on flexibility.
"And perhaps most of all, it means resisting the temptation to assume prosperity is easily achieved, or easily managed.
"In that spirit, let me offer three observations.
"First, we start this upswing with less spare capacity than some previous ones.
"After a big recession, it usually takes some years for well-above-trend growth in demand to use up the spare capacity created by the recession. This time that process will not take as long. Most measures of capacity utilisation, unemployment and underemployment are much more like what we saw after the slowdown in 2001, than what we saw after the recession in the early 1990s.
"This is not a problem. In fact, it is good. It is a goal of macroeconomic policy to try to keep the economy not too far from full employment.
"And some spare capacity does exist, and will do so for a little while, which is why we think underlying inflation will probably come down a little more in the period ahead.
"But it does underline the importance of adding to supply, not just to demand, over the medium term, and of ma
