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 (second report), together with the minutes of proceedings, and I ask leave of the House to make a short statement in connection with the report.

Leave granted.

On 1 August 2017 the RBA decided to leave official interest rates on hold at 1.5 per cent. In making this decision, the governor commented that 'holding the stance of monetary 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 before the committee on 11 August 2017, the governor noted that the global economy has strengthened and, as a result, the RBA expects domestic economic conditions to improve. The RBA forecasts Australia's GDP growth to rise above two per cent in late 2017, to 2¾ to 3¾ per cent over the year to December 2018. Continued growth is being supported by accommodative monetary policy, an increase in LNG exports, and employment growth.

Underlying inflation is somewhat higher than late last year, and the RBA forecasts that it will reach around two per cent over the second half of 2017, at the bottom end of the RBA's target. Headline inflation is expected to lie between two and three per cent over the year to December 2019, with the consumer price index (CPI) forecast to rise to around two percent by the end of 2017.

Since its low point in January 2016, the Australian dollar has appreciated considerably against the US dollar and on a trade-weighted basis. The governor stated that the current exchange rate will 'contribute to subdued price pressures in the economy'. The governor added that an appreciating exchange rate would be expected to result in slower economic growth and inflation than currently forecast, and the exchange rate is an issue which continues to be of great interest to the RBA and the committee.

Since the beginning of 2017, around 165,000 full-time jobs have been created in Australia, average hours worked have increased, and labour force participation has risen. The RBA expects that the recent strong growth in employment and increased household income will support consumption growth, moderated by high levels of household debt and lower wage growth.

Business investment in Australia is expected to increase gradually as growth in demand increases. The RBA noted that conditions are currently favourable for stronger growth in business investment, including low interest rates and reduced tax rates for small and medium sized businesses.

Overall, Australia's economic growth outlook, according to the Reserve Bank, is positive, with the transition to lower levels of mining investment almost complete—and indeed we've seen the impact of that in recent business investment figures. Increases in the production of LNG are expected to help to contribute to GDP growth in Australia of between two and three per cent for the year to the end of 2017.

On behalf of the committee, I thank the Governor of the Reserve Bank, Dr Lowe, and his colleagues for appearing at the hearing before our committee in Melbourne on 11 August 2017.

I commend the report to the House.

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

See this speech in context