Craig Laundy (Reid, 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 2014 (Second report), together with the minutes of the proceedings.

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

by leave—The Australian economy has been progressing through a major adjustment, with terms of trade declining by a third and reaching 2006 levels. The governor noted that investment in the resource sector is about halfway through its decline and will likely fall to about five per cent of GDP from its peak of about eight per cent. In comparison, some of the non-mining sectors have shown significant improvements over the last 12 months, and the governor was optimistic about the Australian economy, noting that GDP growth was likely to exceed three per cent by June 2017.

Current labour conditions have generally been better than expected, with unemployment likely to remain unchanged for about 18 months before declining in 2017. While there is still excess capacity in the labour market, employment has increased by about two per cent over the last 12 months, and surveys indicate conditions in the household and business service sector have been above average.

The exchange rate has fallen to around its lowest level since 2009 and may depreciate further once the US Federal Reserve begins increasing interest rates. The governor noted that a lower exchange rate was unlikely to lead to increased inflationary pressures and the Australian dollar at its current level was helping to support demand for locally produced goods and services, which should in time lead to more investment.

The governor commented that the RBA's decision on 1 September 2015 to leave official interest rates at two per cent was appropriately accommodative given the current circumstances. He added that the economic and financial conditions over the period ahead will inform the RBA as to whether the current policy will most effectively foster sustainable growth and inflation in line with the target.

It is encouraging to note the governor's view that underlying fundamentals of the economy have continued to improve. The adjustment of the decline in the terms of trade is well underway, and, if non-mining activity continues to improve, this will likely lead to better output growth as the Australian economy reaches the later phases of the decline in mining investment.

I would like to thank all of the secretariat involved in helping the committee to put this report together. I would like to thank my fellow committee members for their assistance, particularly the previous chair, the member for Bennelong, John Alexander. Finally, on behalf of the committee, I would like to thank the Governor of the Reserve Bank, Mr Glenn Stevens, and other representatives from the RBA for appearing at the hearing on 18 September 2015.

I commend this report to the House and move:

That the House take note of the report.

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