David Coleman (Banks, 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 2016 (First report) together with the minutes of proceedings.

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

by leave—On 7 February this year the Reserve Bank decided to leave official interest rates on hold at 1.5 per cent. In making this decision, the Governor of the Reserve Bank commented that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

At the public hearing held on 24 February this year the governor noted that, given headline inflation has risen in most countries and is much closer to target than it has been for some years, the forecast for global growth has been revised upwards over the recent months, and that is the first time that that has happened for quite a few years. After a weaker than expected September quarter last year, Australia's GDP growth is expected to pick up, sustained by a combination of monetary policy, a lower Australian dollar and other measures. The RBA forecasts that GDP growth will increase to between 2½ per cent and 3½ per cent during 2017, which will place it at the top end of international growth rates.

While inflation remains low, it is expected to move closer to target with the CPI forecast to rise to around two per cent by the middle of 2017. During the hearings it was also noted that, since its low point in January 2016, the Australian dollar has appreciated by over 10 per cent against both the US dollar and on a trade-weighted basis. However, the governor noted that the historical depreciation of the Australian dollar continues to support growth in a range of Australian industries, particularly those exposed to export markets, and has remained largely unchanged since the US election.

The governor's testimony suggests that consumption growth is moderating and that wages growth continues to be restrained. Unemployment remains stable, with employment growth being driven by increases in part-time employment. Housing markets across Australia have been mixed. While the Sydney and Melbourne markets continue to record strong growth, other markets, such as Perth, have experienced much weaker conditions. There was a substantial improvement in the number of building approvals in the past two years, mainly driven by strong growth in new apartments being built.

Australia's economic growth is more optimistic than it was in March of 2016, with evidence showing that the headwinds of the declining mining investment and low commodity prices have eased. The RBA expects GDP growth in Australia of between two and three per cent by the end of 2017, and that will be supported by increases in the production of LNG and improving terms of trade. On behalf of the committee, I thank the Governor of the Reserve Bank, Dr Lowe, and other representatives of the RBA for appearing at the hearing on 24 February. I commend the report to the House.

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