Kelly O'Dwyer (Higgins, Liberal Party) Share this | Hansard source

On behalf of the Standing Committee on Economics, I present the committee's report entitled Review of the Reserve Bank of Australia annual report 2013 (first report), together with minutes of the proceedings.

Report made a parliamentary paper in accordance with standing order 39(e).

I now wish to make a statement in relation to that report. I am very pleased to be presenting the first report of the economics committee for the 44th Parliament. The committee holds two public hearings each year with the Governor of the Reserve Bank, and this report follows the first of these hearings for the new committee, on 18 December 2013, following the federal election.

The RBA noted in its November 2013 Statement on monetary policy that 'the prospect of a pick-up in conditions in many advanced economies is likely to see growth for the world as a whole improve from a below-average pace in 2013 to around average in 2014'. The RBA also forecast 'a little above average' growth in Australia's major trading partners in 2014.

Australian growth was two to three per cent of GDP in 2013 and the RBA assessment is that inflation will remain consistent with the medium-term target over the next one to two years.

The economies in China, the United States, Japan and Europe are all showing signs of recovery. The governor commented that global financial conditions remain very accommodative, market volatility has abated, and there is ample funding available for creditworthy borrowers.

Despite these initial signs of recovery in developed economies, there is still a lot of work required to avoid further economic instability.

The recent G20 meeting in Sydney has brokered a hugely significant accord to increase global growth by two per cent above the current trajectory over the next five years. Australia has an important role in helping to realise this goal by implementing policies that will achieve workplace reform and boost productivity.

At its December and February meetings, the RBA board judged that it was prudent to hold the cash rate steady at 2½ per cent given the substantial degree of policy stimulus that had been imparted and evidence of its effects. The board indicated in its February statement that market pricing suggests no change to the cash rate is expected for about a year.

In his statement on the board's decision, the governor stated that monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. The governor's view is that the most prudent course in this regard is likely to be a period of stability in interest rates.

The exchange rate has been a significant source of economic uncertainty and the Australian dollar has appreciated significantly over the past decade.

The governor commented that a lower rate is likely to be needed for balanced growth, which would also likely see a sooner than forecast growth increase with some upward pressure on inflation. The governor does not favour intervention in the exchange rate at this stage.

The RBA welcomed the one-off $8.8 billion grant to the Reserve Bank Reserve Fund which will be made by the government before the end of the financial year. The MYEFO states that this grant will ensure that the RBA is adequately resourced to conduct foreign exchange and monetary policy operations. The governor stated that this one-off injection of funds will be important in bringing the fund up to 15 per cent of the bank's assets at risk, the level sought by the RBA, on as early a schedule as possible.

Australia is transitioning to a post-mining-boom era with both the MYEFO and the RBA forecasting declining investment in the resources sector. This may create opportunities to invest in other sectors of the economy, including infrastructure. Such investments will be needed to realise productivity gains and future growth, but the decision making in this regard must be sound. I again note that Australia played a very leading role in hosting the G20 last week, as well as the business working group that is focused on how we can get more productivity-enhancing infrastructure not only in Australia but in those countries that are part of the G20.

Finally, on behalf of the committee I would like to thank the Governor of the Reserve Bank, Mr Glenn Stevens, and other representatives of the RBA for appearing at the hearing on 18 December 2013. The committee looks forward to its next hearing with the governor this coming Friday in Sydney.

I commend the report to the House.

See this speech in context