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

On behalf of the Standing Committee on Economics, Finance and Public Administration, I present the committee’s report entitled Review of the Reserve Bank of Australia Annual Report 2006 (Second Report) together with the minutes of proceedings.

Ordered that the report be made a parliamentary paper.

The August 2007 hearing was conducted in the light of a strong domestic economy but at a time when there was some volatility on global markets as a result of growing problems in the US subprime mortgage market. The rising delinquency rates in the subprime mortgage market had resulted in a sharp fall in prices to mortgage backed securities and collaterised debt obligations, which created problems for the holders of these products. During this period, a number of central banks acted to increase liquidity in the banking system. Notwithstanding these problems, the Reserve Bank of Australia reported that global growth remained strong. The RBA stated that, while there had been a slowing in the United States, this had largely been confined to the housing sector, with the wider economy still growing at a reasonable pace.

The June quarter CPI figures revealed an increase in inflation. The RBA raised its December 2007 underlying inflation forecast to three per cent, which was the top of its target band. On 8 August, based on the new inflation data and other information, the RBA raised rates by 25 basis points to 6.5 per cent. The committee examined the RBA on the accuracy of its inflation forecast in view of the fact that its August forecast for December 2007 inflation was 50 basis points above its May forecast. The RBA governor explained that, while there was pick-up in inflation during 2006, one quarter revealed a softer figure. It is not clear whether that was a new trend or an aberration. Notwithstanding this, Mr Stevens concluded that the ongoing strength of demand in a fully employed economy might leave us with inflation pressure that is harder to manage than expected.

In conclusion, I take this opportunity to say a personal farewell. The public hearing on 17 August was my final hearing as chair of the committee, as I will not be standing for re-election in the forthcoming 2007 election. I took over from an outstanding chair—namely you, Mr Speaker—and it has been my pleasure to be in that role. I thoroughly enjoyed the responsibility and the challenge of being chair of the committee, and I appreciate the contribution of my fellow committee members. The committee has worked extraordinarily well together. I commend my colleagues from both sides of the House—Ms Bird, who is the deputy chair of the committee and the member for Cunningham, and also Dr Craig Emerson and my other colleagues. It has worked well.

It was also the view of the committee that the professionalism, competence and diligence of the secretariat members were quite outstanding. It was the view of the committee that we should write to the Clerk to reflect our high regard for the committee and to inform the Clerk that they represent the highest standards of parliamentary officers. I believe that should be recorded. It is with pleasure I commend this report.

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