He said household spending and demand for credit has slowed, and also that the housing market has softened. He said that construction has at least seen an increase, but that "overall, households are at present much more cautious about spending and borrowing, after a number of years in which confidence levels were very high and there had been strong rates of growth in borrowing and spending."

He also said that the surge in oil prices has had a dire affect on household spending as well as businesses.

He said that concern over the financial crises seen in the U.S. has spilled a bit into Australia, and that loans to large companies has slowed in particular. Nevertheless, he said "overall, what we see in the Australian financial scene is an order of magnitude less troubling than what we see abroad."

He also said that though household spending is on the decline, the domestic demand in the economy rose by 4% annually.

He said he expects "weakish" growth in the near term.

Turning to inflation, he said that inflation numbers will remain "uncomfortably high" for the next little while on price pressure due to raw materials prices.

He said the third and fourth quarters may see a peak of about 5%, and afterwards start to fell backwards.

He said going forward, monetary policy has to balance price and growth risk.

By Megan Ainscow, This email address is being protected from spam bots, you need Javascript enabled to view it

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