RBA warn on austerity spiral.

Reserve Bank Deputy Governor, Philip Lowe, addressing the Committee for Economic Development of Australia in Sydney.

..fiscal policies, both in Europe and the United States, were set to be “quite contractionary” both this year and next.

“There is therefore a material risk that fiscal consolidation weakens growth in the short run, which leads to more fiscal consolidation in order to meet previously announced targets and, in turn, yet weaker growth,” Mr Lowe said.

“We are currently seeing this dynamic play out in a couple of the countries in southern Europe.