Scott Buchholz (Wright, Liberal Party) Share this | Hansard source

I rise to speak on the review of the 2011 annual report of the Reserve Bank of Australia by the House of Representatives Standing Committee on Economics and the committee's hearing with senior members of the Reserve Bank, including the bank's Governor Glenn Stevens, in February this year. As a proud member of the House of Representatives Standing Committee on Economics I relish the opportunity to participate and discuss monetary policy settings with my colleagues. The committee also has the opportunity to question the Reserve Bank on monetary policy settings, and that happens twice a year.

When questioning the Reserve Bank about monetary policy and the management of the Australian economy, we cannot ignore the government's fiscal policy settings. This is a feature of the report and has been a feature of much economic analysis subsequent to the report. Unlike the Labor Party, coalition members have a view that Australia's seemingly good fortune is not a derivative of Labor's fiscal management nor the government's finely tuned fiscal policy settings. Rather, the opinion of the coalition members—and we did seek to verify these views in the report with respect to responsible economic management—is that it is really a legacy of the former coalition government.

That is not to say that it has all been bad, but the evidence was there from the Reserve Bank. Much of Australia's ongoing economic success and the resilience and strength of the Australian economy were also due to our geographic location more than they are from any brilliance by the current Treasurer. One of the reasons why our terms of trade are fantastic at the moment—record highs—is because of demand in our resources sector. Make no mistake: China wants our raw materials. Our trading partners want coal, they want iron ore, they want our bauxite. We are well placed as a nation to continue to serve them.

The testimony of the Reserve Bank governor was clear. Australia will continue to have economic challenges in the future as we undertake a very significant period of structural reform across the economy. When the Reserve Bank governor says that Australia will continue to have economic challenges in the future as we enter very significant periods, I counsel my colleagues, when pinning their economic credibility to a wafer-thin surplus in such a volatile market, that we should move into the economic arena with caution, in particular with our forecasting of budget surpluses or deficits.

We will continue to see pressures being placed on the banks with respect to their funding costs, and there will need to be continual revisions of interest rates and the official cash rate by the Reserve Bank to get the balance right between inflation and economic growth for Australia into the future. Since the report was tabled we have seen the inflation rate fall under the inflation range and we have seen the Reserve Bank move to stimulate the economy in the way of a movement in the cash rate.

However, talking of banks, it is perplexing to the Australian people that, while banks claim the cost of funds is a major source of their increasing costs, they still manage to somehow produce record profits. Since this report was tabled we have seen inflation move, as I mentioned before. I thank heaven for the independence of the Reserve Bank and its ability to act to stimulate the softening economy. I particularly note the comments in paragraph 2.9, page 7, of the report:

There are sectors of the Australian economy which are experiencing average performance. Some are weak relative to historical averages, others stronger.

In paragraph 2.13, it says:

Global growth is now expected to be below trend in 2012 …

I come from the electorate of Wright where I have very little or no linkages to the resources sector, so I do not experience the spin-off of the two-speed economy when the resources sector is going gangbusters. I have made the comment many times in the public arena that the electorate of Wright is the economic weathervane of the nation when it comes to that softer part of the economy—the mums and dads who have no linkages to the resources sector. I can assure the committee and the House that there are sectors in my electorate that are doing it extremely tough in the current conditions. With reference to the labour market, the RBA advises that the unemployment rate is drifting up, to 5.5 per cent, and those predictions were emulated by Treasury modelling recently. It will be interesting to hear the response of the RBA to the participation rate, which by all accounts is falling and having an impact on the capacity of families to meet the growing demands of household cost-of-living pressures and, additionally, having an impact on the small- and medium-sized business sectors.

Speaking of the participation rate, we need to be mindful that, whilst we may see reports that the labour market is at 5.5 per cent for unemployment, if those unemployed are doing 38 hours a week, and through economic pressures their labour participation drops back down to 20 per cent, it will not influence the 5.5 per cent or the overall percentage rate but it will have an impact on families, especially on the money that flows through the household. It will be interesting to hear the RBA's response to the participation rate, which by all accounts is falling and having an impact on families.

If this government had managed the surplus, or the buffer as it is now referred to, to the tune of the $20 billion that we left them, our fiscal and monetary positions may well have been very different from those today. I would like to offer my respect and gratitude to the outgoing members of the RBA board, particularly Donald McGauchie and Warwick McKibbin. We do appreciate the incredibly valuable service that both gentlemen provided to the RBA. We welcome the appointment of the new members to the RBA and we trust that they will provide counsel and wisdom to the Reserve Bank of Australia in the same capacity as their predecessors. We appreciate the expertise they provided for the good of Australia and its people in developing sound monetary policy settings. I wish them well in their new chosen fields and their continuing contribution to the betterment of the Australian economy and the fiscal and monetary outlook.

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