Australia's next central bank governor will inherit an entirely different set of economic conditions and risks than Glenn Stevens, who retires next year, faced when he took the helm a decade ago.
The challenge: growth.
Chances are that task falls to Stevens' deputy, Philip Lowe, according to economists.
Stevens' early challenge was setting policy amid rising prosperity spurred by soaring export prices. His successor faces sliding terms-of-trade and a slump in mining investment the central bank says is only half done.
The jobless rate was 6.2 per cent last month, hovering near a 13-year high. Wage growth has slowed to a pace the central bank describes as recessionary. Incomes grew 2.3 per cent in the second quarter from a year earlier, little more than half the 4.2 per cent growth of 2006.
Housing prices are soaring, fuelled by a record low 2 per cent benchmark interest rate. In Sydney, the average price last month was A$920,000 ($1 million) -- up 23 per cent from just over a year earlier.
Resources now make up more than half of Australia's exports, compared with 2000 when they accounted for less than a third.
The key international issue is China. The world's second-largest economy accounted for much of the A$1 trillion in extra export earnings during the mining boom, but it is steadily transitioning to consumer-led growth. Stevens also oversaw winding down of manufacturing in the economy as the resource boom sent the currency to a post-float record of $1.10.
Lowe would inherit less policy ammunition to deal with any downturn. Stevens was able to lower the cash rate by 425 basis points during the global financial crisis to 3 per cent, but as growth revived, he tightened to 4.75 per cent in November 2010, before cutting by 275 basis points as the mining boom wound down.
On the plus side, the Australian dollar has dropped about 25 per cent in the past two years, improving the competitiveness of exporters and easing monetary conditions.
