Mr Stevens said in contrast to households and governments, "the business sector's aggregate leverage is lower than it was a decade ago."
There has been "a substantial increase in the amount of cash at the bank held by the business community over this last five years, and by substantial we're talking in the hundreds of billions," he said.
"My conclusion would be that the liquidity of the business sector and its balance sheet has improved a lot over the past five years," he said.
"Businesses are in the position to play their role in the growth dynamics to take advantage of lower funding costs, if they have the confidence to do so."
Based on the stated intentions of governments to try and strengthen their balance sheets, public spending is expected to be "subdued over the next two or three years," Mr Stevens said.
"By and large the public sector isn't really going to be gearing up its balance sheet in response to cheap funding in this period….it's more inclined, gradually, to be in consolidation mode," he said.
At the same time, household ratios of debt to income increased from 60 to 150 per cent between 1993-2006, he said.
Households are servicing that debt quite well but "it seems unlikely that household debt and spending is going to behave like that again…and nor would it be desirable," he said.
While we can expect household consumption to grow in line with income, "we're not going to see a return to the role of the consumer driving growth in the powerful way that it did in that earlier period," he said.
On the labour market, Mr Stevens said it has spare capacity but it "will be a while yet before we see (the rate of) unemployment come down in a sustainable way".
However, Mr Stevens warned: "While we may desire to see a faster reduction in the rate of unemployment, further inflating an already elevated level of housing prices seems an unwise route to try to achieve that."
This speech was delivered to a CEDA forum in Adelaide the same day Australia's official June quarter GDP data was released, and the day after the RBA left the official cash rate unchanged at 2.5 per cent for the 12th month in a row.