David Bradbury (Lindsay, Australian Labor Party) Share this | Hansard source

I move:

That the House:

(1)

takes note of the 50th anniversary of the Reserve Bank of Australia (RBA);

(2)

recognises the important role of the RBA in Australia’s economic policy direction; and

(3)

reaffirms its support for the independence of the RBA.

I rise to take note of the 50th anniversary of the Reserve Bank of Australia. The RBA is one of the cornerstones of economic stability in this country. It came into existence on 14 January 1960. It was established to conduct the central banking functions of the Commonwealth Bank of Australia, which had reached a point where it could no longer perform its dual role as a central bank and a market participant in the commercial banking sector.

Given its powers to operate under the Reserve Bank Act 1959, the RBA is granted the autonomy to set monetary policy and is given the powers to implement this policy. Section 10(2) of the act sets out the bank’s charter, and it underscores the importance of the role it plays in ensuring the integrity of the Australian financial system. It says:

It is the duty of the Reserve Bank Board … to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank … are exercised in such a manner as … will best contribute to:

(a)

the stability of the currency of Australia;

(b)

the maintenance of full employment in Australia; and

(c)

the economic prosperity and welfare of the people of Australia.

It has the responsibility for issuing the nation’s currency, managing our gold and foreign exchange reserves and overseeing our payment system. The RBA also had responsibility for supervising the banking system until the creation of the Australian Prudential Regulation Authority in 1998.

But, of course, the RBA’s most significant and public role is that of directing monetary policy. While the finer details of the operations of the RBA are often not the subject of conversations at backyard barbecues, the monthly meetings of the board are arguably some of the most watched and keenly anticipated events on the monthly calendar, particularly in communities like mine. The movement of interest rates up or down is the stuff of news that stops a nation, even on the first Tuesday of November, when the nation stops for other reasons.

We now have more insight into how the RBA board makes its decisions, with the release of a statement by the governor announcing the decision followed by the release of board minutes one week later. The RBA’s approach to monetary policy is underpinned by inflation targeting. Since the early 1990s, the RBA has adopted a policy of maintaining inflation within the target band of two to three per cent and adjusts monetary policy accordingly. Inflation targeting was endorsed by the former government in 1996, and it continues to have the support of the Rudd government.

In executing its duties to maintain the stability of the Australian financial system, the RBA has also played a major role in steering the country through the global financial crisis. From late 2008, as the global financial crisis began to unfold, Australia faced a loss of revenue equal to the entire health budget and stared at the very real prospect of a job-destroying recession. Here in Australia, the Rudd government acted quickly and decisively to stimulate the economy by investing in nation-building infrastructure. Our actions to stimulate demand had the effect of not only slowing the rise of unemployment but actually creating jobs at a time when the United States and other advanced economies experienced double-digit unemployment figures.

At the same time, the RBA led the world’s advanced economies by being the first central bank to start aggressively loosening monetary policy. In concert with the fiscal policy of the Rudd government, the RBA’s swift action proved to inject further stimulus at the household level, eventually slashing interest rates by four per cent between September 2008 and April 2009. The rapid easing of fiscal and monetary policy to stimulate the economy has arguably been the deciding factor in Australia’s relatively swift recovery from the crisis and is one of the reasons we were able to avoid recession.

The key to the long-term effectiveness of the role the RBA plays in maintaining the stability of our economy is in its independence. Maintaining the independence of the RBA is a policy that continues to have bipartisan support. Importantly, the Rudd government introduced legislation to enhance the independence of the positions of governor and deputy governor by ensuring that the termination of these positions can only be made with a resolution of each house of the parliament.

I would like to offer my congratulations to the current governor, Glenn Stevens, and all of the staff and members of the board, past and present, for reaching this important milestone. It is a significant anniversary not only for the RBA itself but for the stability and maturity of the Australian financial system. Tonight I wish to acknowledge the collective contributions of those who have made the RBA a great Australian institution.

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