Bruce Baird (Cook, Liberal Party) Share this | Hansard source

On behalf of the House of Representatives Standing Committee on Economics, Finance and Public Administration, I present the committee’s report entitled Review of the Reserve Bank of Australia annual report 2005 (second report), together with the minutes of proceedings.

Ordered that the report be made a parliamentary paper

I have pleasure in presenting this report of the committee. Australia’s current economic expansion has continued for an unprecedented 15 years. This is an enviable performance and one which many Western countries would like to emulate. The RBA has played a critical part in this success by carefully monitoring inflation and conducting monetary policy so that it contributes to the stability of the Australian currency, the maintenance of full employment, and the continuing economic prosperity and welfare of the people of Australia.

This long period of expansion has resulted in capacity constraints which are creating some inflationary concerns. The RBA is quick to point out that full capacity is not something to fear. For example, the unemployment rate is the lowest in 30 years. Nevertheless, the RBA, taking into account capacity constraints and domestic pressure on prices, together with rising global inflationary pressures, has recently raised rates, taking the cash rate to 6.25 per cent. The RBA advised that the current level of interest rates was in the ‘neutral’ area where interest rates are having neither an expansionary nor a contractionary effect on the economy.

In relation to housing affordability, the RBA was surprised at the enormous public focus placed on the recent rate increases and their apparent impact on housing affordability. Mr Macfarlane, the then Governor of the RBA, suggested that the real problem for people was not the rate increases but the fact that houses were so expensive.

During the examination of housing affordability, scrutiny focused on the role of state governments in relation to land release. Mr Macfarlane commented that the reluctance to release new land plus the new approach whereby the purchaser has to pay for all the services up-front—the sewerage, the roads and the footpaths—have enormously increased the price of the new, entry-level home.

The public hearing held on 18 August 2006 was particularly productive and marked the final appearance of Mr Macfarlane, who retired during September. I take this opportunity, on behalf of the committee, to congratulate Mr Macfarlane on his leadership of the RBA over 10 successful years and I commend him for his outstanding contribution to the stability and growth of the Australian economy.

Finally, I would like to advise the House that the committee’s next public hearing with the RBA will be held in Perth on 21 February 2007. The committee is obviously keen to probe the RBA on the latest rate rise. This hearing will also mark the first appearance before the committee of the new governor, Mr Glenn Stevens. I commend the report to the House.

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