RBA bullish on trading partners

The global economic headlines last month seemed to be painting a world of continuing crises and substandard growth. As far as our world was concerned, though, those headlines were misleading.

The latest Reserve Bank board minutes start with a much more sanguine view of our trading partners' performance than that portrayed in the popular media.

"Overall, growth of Australia's major trading partners in the June quarter was around its average of the past decade and recent indicators suggested that this pace of growth had continued.

"The Chinese economy was growing at around the pace evident since the start of the year, and members noted that indications were that GDP growth was likely to remain close to the authorities' target of 7.5 per cent over the remainder of the year."

So the parts of the world that matter most to us are running about their average speed, booms and great recessions notwithstanding. You could be forgiven for having missed that as the alarmists tend to receive so much coverage. And this month's RBA board meeting was before the latest clutch of stronger Chinese statistics.

Yes, the capital outflow issue for some emerging markets was noted, especially India, Indonesia, Turkey and Brazil, but that might not be as bad as some portrayed.

"Members noted that the authorities in these four countries appeared to be less concerned about depreciating exchange rates per se than they were about the speed of the depreciation, partly because of the implications for inflation.

"They also observed that emerging market economies generally had become much better placed to handle this type of pressure ... with most jurisdictions now holding large foreign exchange reserves relative to their short-term debt and having relatively less foreign currency-denominated debt than in the past."