Preliminary Pages

Chair’s foreword

On 4 February 2009 the Reserve Bank of Australia (RBA) announced a 100 basis point reduction in the official cash rate bringing it down to 3.25 per cent. The RBA Board decided to reduce the cash rate when it became apparent that the global economic outlook was worsening. The collapse of the global financial services firm Lehman Brothers in September of last year was the catalyst that prompted a massive reassessment of risk globally.

The RBA took quick and decisive action over this time to reduce the official cash rate. Between September 2008 and February 2009 the official cash rate was reduced five times, a total decrease of 400 basis points since 3 September 2008.

In January, the International Monetary Fund took the unprecedented step of calling on governments of advanced and emerging economies to implement fiscal stimulus in order to support world growth.

Governments around the world have taken steps to bolster their financial systems with a number of domestic and international measures.

The Governor of the RBA in his statement announcing the 4 February rate cut noted the significant deterioration in world economic conditions late in 2008 and that substantial falls in commodity prices has had a significant dampening effect on confidence.

Australia’s economy has been impacted by the deterioration in international economic conditions which has substantially slowed growth. While Australia’s economy has slowed, comparatively the economic downturn has not been as severe as in other advanced economies.

These are the worst global economic conditions seen for some time and there is still considerable uncertainty about the economic outlook.  It is therefore more critical than ever for the committee to scrutinise the RBA on its key forecasts for economic growth, inflation and employment.

On behalf of the committee, I would like to thank the Governor of the Reserve Bank, Mr Glenn Stevens and other representatives of the RBA for appearing at the hearing on 20 February. The next hearing will be held on 14 August 2009 in Sydney.

Craig Thomson MP

Chair

Membership of the Committee

Committee Secretariat

Terms of reference

The House of Representatives Standing Committee on Economics is empowered to inquire into, and report on the annual reports of government departments and authorities tabled in the House that stand referred to the Committee for any inquiry the Committee may wish to make. The reports stand referred in accordance with the schedule tabled by the Speaker to record the areas of responsibility of the Committee.

List of abbreviations