Committee activities (inquiries and reports)

Review of the Reserve Bank of Australia Annual Report 2004(Second Report)

September 2005
Canberra

© Commonwealth of Australia 2005
ISBN 0 642 786631

Contents

Foreword
Membership of the Committee
Terms of reference
List of abbreviations

Foreword

The committee’s August 2005 public hearing with the Governor of the Reserve Bank of Australia (RBA and the Bank) was the second meeting for the House Economics Committee in the 41 st parliament. The RBA continued to report on a healthy economy which is in its fourteenth year of continuous growth. Earlier in the year, the RBA was concerned about the economy over-heating and responded by raising rates in March 2005. At the August hearing, the Bank reported on an economy where the risks are now balanced rather than being on the up side.

The August hearing came at a time when interest rates had risen by 25 basis points in March which ended a 15 month period of no changes to official rates. While there was much speculation surrounding the February hearing regarding an imminent rise in rates the August hearing did not attract similar speculation; on the contrary, many media commentators were predicting a period of no further upward movement with some even suggesting rates may fall before the end of the year. Where interest rates will be at the end of the year and forecasts for inflation were central to the discussions. Other issues examined at the hearing included the relationship between housing prices and household expenditure, the prospects for the global economy and what steps have been taken to address some of the capacity constraints. The committee also sought an update on the reform agenda of the payments system.

The evidence given at the hearing enabled the committee to examine further the setting of monetary policy as well as discuss other aspects of the economy not directly under the control of the RBA.

The hearing continued to provide the community, financial sector, and the media with a valuable opportunity to monitor the way in which the Bank conducts monetary policy in Australia.

At the hearing, the committee welcomed school students and their teachers from the Melbourne metropolitan area. It was gratifying to see students of economics taking an interest in monetary policy and the role of the Reserve Bank.

On behalf of the committee, I thank the Governor of the Reserve Bank of Australia, Mr Ian Macfarlane, for his discussion and for the contribution of his staff. The committee also appreciates the pre hearing briefings from Dr Alan Oster from the National Australia Bank and Mr Bill Evans from Westpac. I also appreciate the hard work of the Deputy Chair Chris Bowen and our fellow committee members and that of our secretariat staff and advisers.

The Hon Bruce Baird MP

Chairman

Membership of the Committee

Committee Secretariat

Terms of Reference

The House of Representatives Standing Committee on Economics, Finance and Public Administration 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.

The focus of the hearing was on the following documents:

• the Reserve Bank of Australiaannual report 2004 which was tabled in the House of Representatives on 17 November 2004
• the Payments System Board annual report 2004 which was tabled in the House of Representatives on 30 November 2004
• Statement of Monetary Policy, Reserve Bank of Australia, August 2005

List of abbreviations

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