The balance sheets of firms improve when they experience rising sales and profits, which in turn gives them easier access to financing, and under better terms, thereby leading to more investment. See B. Bernanke, M. Gertler and S. Gilchrist, “The Financial Accelerator in a Quantitative Business Cycle Framework,” in Handbook of Macroeconomics, Volume 1, eds. John Taylor and Michael Woodford (Elsevier, 1999).
While we are not expecting a return to strong economic growth in the near term, we are expecting growth to pick up. Against this backdrop, the main source of domestic uncertainty continues to be the strength of household spending. The second message is a longer-term one. And that is the fundamental factors underpinning the longer-term outlook for the Australian economy remain strong.