John Alexander (Bennelong, Liberal Party) Share this | Link to 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 (first report), together with the minutes of proceedings, and I ask leave of the House to make a short statement in connection with the report.

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

by leave—This report follows a hearing with the governor and other senior officials of the RBA on 13 February in Hurstville, Sydney. The RBA lowered the official interest rate last month from 2.5 per cent to 2.25 per cent, the first rate change in 18 months. At our hearing with the RBA last month, the governor commented that this decision was taken because of a more sustained period of below trend growth than previously forecast. A higher peak in unemployment and slightly lower inflation also contributed to the decision.

The lower interest rate is expected to provide some support to demand in the short term although the governor noted at the hearing that the capacity for monetary policy to do so is perhaps lower than it used to be. The non-resources sector and Australia's growing trade partnerships with Asia are most likely to generate GDP growth in the long-term. Current labour conditions in Australia are still somewhat subdued and the unemployment rate is now expected to peak later than previously anticipated.

The RBA commented at the February hearing that, as growth is likely to remain at current levels for longer than was hoped, the unemployment rate may rise slightly in the near term. The Australian dollar has depreciated considerably against the US dollar in recent months, and this is expected to benefit the traded sectors of the economy. However, the RBA has commented that our dollar still remains above most estimates of its fundamental value. The exchange rate is therefore expected to adjust further, and the governor informed the committee that this will depend to a large degree on how far the terms of trade fall.

It is encouraging to note the governor's view that productivity growth has begun to improve, but it will be important to see further increases in productivity going forward. The committee also noted with interest the governor's view that Australia's public sector debt needs to remain low if we want to have scope to expand fiscal policy in the event of future global financial shocks.

On behalf of the committee I would like to thank the Governor of the Reserve Bank, Mr Glenn Stevens, and other representatives of the RBA for appearing before the committee on 13 February 2015. I would also like to thank my committee colleagues, including the member for Chifley in his capacity as deputy chair, and the secretariat for all their hard work and support. I commend the report to the House.

Mrs Bronwyn Bishop (Speaker) Share this | Link to this | Hansard source

Does the member for Bennelong wish to move a motion in connection with the report to enable it to be debated on a future occasion?

John Alexander (Bennelong, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Mrs Bronwyn Bishop (Speaker) Share this | Link to this | Hansard source

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.