Tim Wilson (Goldstein, Liberal Party) Share this | Hansard source

On 7 August 2018, the Reserve Bank of Australia, the RBA, left official interest rates unchanged at 1.5 per cent. In making this decision, the governor commented that accommodative monetary policy was continuing to support growth in the Australian economy and the board did not see the need to alter the cash rate.

At the public hearing on 17 August 2017, the committee scrutinised the board's decision to maintain the cash rate at its lowest historical level for the past two years, given that Australia's economy is now growing above three per cent and the unemployment rate has dipped below 5½ per cent. The governor noted: 'In the broad sweep of our economic history, these are a pretty good set of numbers,' and he said that the RBA expects further progress in reducing unemployment and having inflation return to target; however, he said that this progress is likely to be gradual.

Australia's economy continues to grow strongly, and the RBA expects GDP growth to average around 3¼ per cent by the end of 2018 through to the end of 2019, reflecting above-trend growth in a number of major economies. This is being supported by a pick-up in non-mining investment, strong commodity prices, growth in investment and energy projects and public sector infrastructure, low interest rates and the tax cuts that have already been put in place for small and medium businesses—and exciting ones to come.

While the global economy is growing strongly, the governor reported that a number of risks have emerged that could dampen investment and growth, such as the escalation of trade tension between Australia's biggest trading partners, the United States and the People's Republic of China. He noted that it was in everyone's interests for China and the United States to resolve their differences and that it was important that Australia continue to promote free trade as a pathway to prosperity in international fora.

Australia's labour market has continued to strengthen, with the labour force participation rate currently at 65.5 per cent, which is close to its historical high. Strong, continued growth in employment is expected to further reduce spare capacity in labour markets and generate a gradual increase in wages and inflation. While growth in average wages has been relatively low, we have turned the corner on wages growth. The wage price index increased by 0.6 per cent in the June quarter, which is the fastest quarterly increase since March 2014.

On behalf of the committee, I thank the Governor of the Reserve Bank, Dr Philip Lowe, and other representatives of the RBA for appearing at the hearing on 17 August 2018. I would also like to thank the former chair of the economics committee, Ms Sarah Henderson MP, for her contribution. On that note, I commend the report to the House.

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