Daniel Mulino (Fraser, Australian Labor 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 2021, together with the minutes of proceedings.

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

by leave—The Australian economy is experiencing challenging conditions. Over the past year or more a number of global factors have contributed to an environment of rising global inflation. Australia, along with all major economies, has been affected by this. I know from speaking to many people in my electorate that individuals and families are feeling cost-of-living pressures. It is timely that the House Standing Committee on Economics Review of the Reserve Bank of Australia annual report 2021be tabled at this time.

Over the past 12 months, Australia has experienced rising inflation and, in turn, rising interest rates. This is affecting household budgets. The government has responded with a range of targeted measures, including an increase in the minimum wage, cheaper medicines and more affordable child care. Today I would like to focus on monetary policy over the period covered by this report. In setting the context of the current situation, the RBA governor identified that the macroeconomic challenges and uncertainties for Australia largely originated in the global economy. These included rising inflation and a risk of economic slowdown in major economies, including the US, the EU and the UK; continued risks surrounding production levels and supply chains in China; and the consequences on global food and energy prices of the ongoing illegal war in Ukraine.

One of the policy issues the committee explored was the RBA's conduct of monetary policy. In particular, at the time of the publication of this report, there had been a number of interest rate rises since May 2022. The committee asked the RBA how, when considering further rises, the bank took into account the fact that the rate rises would take time to work through the economy. The RBA acknowledged that there could be considerable lag before interest rate rises had their full impact on economic activity, and that this factored into the decision-making.

The committee also explored aspects of past monetary policy implementation, including forward guidance and yield curve control. In both cases, the RBA acknowledged that it would have done things differently with the full benefit of hindsight. Based in part on reviews that the RBA has undertaken, the RBA has identified a number of lessons to be learnt from that episode.

The committee explored the inflationary pressures being experienced by the economy. The RBA agreed that inflationary pressures are a combination of demand-side and supply-side factors. The committee noted this and is keen that the RBA continue to take into account, when making decisions around rates, that supply and demand side pressures affect the economy differently. Another aspect of monetary policy is that the interest rate rises that we are experiencing affect groups of people differently when responding to demand-side pressures. The committee expects the RBA will continue to analyse the distributional determinants from which demand-driven inflation is emanating, and that this be reflected in interest rate decisions.

The committee also explored the interplay between fiscal and monetary policy—in other words, whether the decisions of the RBA and the government are supporting each other's goals. The RBA agreed it was important that fiscal and monetary policy work together. The governor was asked about the government's current fiscal settings, and he indicated that the bank was comfortable with them, in terms of their inflationary impact, and that he did not expect that spending priorities would put upward pressure on interest rates.

In summary, our economy has experienced rising inflation over the last 12 months. The independent RBA has responded to this with a sequence of interest rate rises. The House Standing Committee on Economics continues to monitor the conduct of monetary policy, given its impact on members of the community, and the important role that the RBA and its monetary policy conduct plays in broader economic management.

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