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Stevens says consumer caution a good thing -

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ALI MOORE, PRESENTER: So what does the debt stand-off in Washington mean for Australia?

The question was answered today by the Reserve Bank governor in a speech.

He says it's yet another dampener on already fragile consumer confidence.

But Glenn Stevens also says consumer caution will be a good thing in the long run.

The Prime Minister is telling Australians to have faith in the country's economic future.

Political correspondent Tom Iggulden has more from Canberra.

TOM IGGULDEN, REPORTER: A blushing Prime Minister hosts Tony Blair in her home town.

TONY BLAIR, FORMER BRITISH PM: A bit out of practice with prime minister press conferences.

TOM IGGULDEN: He told her to take heart from his own experience when it comes to the carbon tax.

TONY BLAIR: I was there when we created the European Union Emissions Trading System. These things
are always tough to begin with. The question is with what's the right position to have for the
future.

TOM IGGULDEN: Tony Abbott says the carbon tax is a load of bull, and so's the Prime Minister's
campaign to sell it.

TONY ABBOTT, OPPOSITION LEADER: If you're fair dinkum about wearing out your shoe leather, you
won't just walk down to the National Press Club, you won't just go down to Melbourne to talk with
Tony Blair, you will actually be out in regional Australia.

TOM IGGULDEN: The Opposition Leader's continuing to trot out his lines across the country.

TONY ABBOTT: Because the cattle industry has been doing it so tough for so long, the last thing
they need now is a carbon tax which will just put their costs up and up.

TOM IGGULDEN: That sort of talk could be frightening the horses, according to the Reserve Bank
governor.

GLENN STEVENS, RESERVE BANK GOVERNOR: There's an evident sense of caution among households and
businesses which, I would say, seems to have become more intense.

Increasingly bitter political debates over various issues are also said by some to have played a
role in affecting confidence. Then we have the global outlook, which looks darker.

TOM IGGULDEN: Despite the darkness, the governor says consumer caution is a good thing. The
debt-fuelled spending binge of the decade before the global financial crisis couldn't be sustained
anyway, he says, and now's a good a time as any to be gathering the acorns in case those
predictions of a global economic winter come to fruition.

GLENN STEVENS: We're actually building resilience into the balance sheets of our households pretty
smartly right now and I think that's a thing which will stand us in good stead, particularly if
there are troubled times at some point in the future.

TOM IGGULDEN: Tony Blair says more economic pain in Europe and Washington will be necessary.

TONY BLAIR: If we want the situation to be stable in the future, we've got to sort some of these
long-term problems out. The financial crisis may have accelerated the need for change, made it more
urgent, but the need for change is there and has happened really as a result of things that have
been building up over a long period of time.

TOM IGGULDEN: Julia Gillard says economic restructuring in Australia won't be as painful and is
urging voters to keep the faith.

JULIA GILLARD, PRIME MINISTER: But the underlying fundamentals of our economy are strong. We've a
big pipeline of investment, strong economic growth to look forward to, and as we go about the job
of pricing carbon a clean energy future to look forward to as well.

TONY BLAIR: Are you not due to return to fiscal balance in, what is it, 2013, or something?

JULIA GILLARD: Yes, 2013.

TONY BLAIR: We'd be pretty happy to be in that situation back in Europe at the moment or in the US.

TOM IGGULDEN: A perfect end to a perfect political date.