Westpac's Kelly says we're too cautious

Australians are being overly pessimistic about the economy and should focus instead on its underlying strengths, the head of Westpac Banking Corporation says.

"There's a lot of caution, I think really more than, given the underlying fundamentals in Australia, there should be," Westpac chief executive Gail Kelly told a business luncheon on Thursday.

She pointed to the booming resources sector, which has Australia's terms of trade - the ratio of export prices to import prices - at near record levels, as a key strength.

Mrs Kelly acknowledged many sectors of the economy, particularly those exposed to consumers' discretionary spending, were doing it tough.

"Having said that, clearly we've got a two-speed economy," she said.

"And we shouldn't forget that the global financial crisis was a big deal.

"It was a mammoth shock to the world and the world's economy."

Consumers had clearly changed their behaviour as a result of the GFC, plus the current financial problems in other countries, with higher levels of saving and less spending, Mrs Kelly said.

"That's not a bad thing. It's a good thing, it toughens us a little, it makes us more ready should there be another event," she said.

"But I think we should be careful that we don't talk ourselves down, be careful that we don't have fear and uncertainty (as they) create more fear and more uncertainty."