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Glenn Stevens says Aussies should save during the current economic boom / File Source: Supplied
AUSTRALIANS should save rather than ramp up spending while the economy surfs a ''once in a century'' tidal wave of prosperity, according to Reserve Bank governor Glenn Stevens.
Sounding a warning about the ''challenge of prosperity'' facing the nation, Mr Stevens said last night that it would be unwise for Australia to become hooked on unsustainable levels of spending.
There was no way to know if Australia's roaring terms of trade - the value of exports relative to imports - would continue at its current 60-year high, he said.
But he signalled that it would be foolish to assume the nation's exports would continue to be so lucrative in the long run.
''It would be a mistake to rest on our recent achievements, as significant as they have been, and to fail to press on in our efforts to do better,'' Mr Stevens said.
''On all the indications available, we are living through an event that occurs maybe once or twice in a century.''
Speaking at a dinner in Melbourne, Australia's chief central banker said the shift in terms of trade, ''unless clearly quite temporary'', would drive structural shifts in the economy.
Some business sectors would prosper while others suffered, and the ''policy challenge for governments will be whether to help these sectors resist change or to help them adapt to it''.
The value of the nation's exports relative to imports has surged 60 per cent this decade, compared with the average over the 20th century.
''A prudent approach might be to use the current period of exceptionally favourable international prices to raise our saving,'' Mr Stevens said.
He said that five years ago, a shipload of iron ore was worth about the same as about 2200 flat-screen television sets. Today it is worth about 22,000 flat-screen TV sets, partly due to TV prices falling but more due to the price of iron ore rising by a factor of six.
He noted that the household savings rate had already swung substantially into positive territory over the past five years.
Australian households are saving about 10 per cent of their income, compared with -1 per cent five years ago, when they were spending more than they were earning.
Mr Stevens said the nation should ''seek to save the bulk of the surge in national income occurring in the next year or two'' until the long-run prospects became clear.
''Consumption we get used to today is harder to wind back in the future if circumstances change,'' he said.
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