Standing Committee on Economics, Finance and Public
Media release, 23 March 1998
RESERVE BANK PERFORMANCE SCRUTINISED AGAIN
'The Reserve Bank's overall good performance on monetary policy was
highlighted in a Committee report to Parliament today.'
'With many of the economic problems that were previously of concern
having been eliminated, or brought under control, the major problem area
remaining is the level of unemployment - a matter of great concern to
'The Financial Institutions Committee today tabled its Interim report
on the Reserve Bank's annual report 1996-97 and the Bank's November 1997
semi-annual statement on monetary policy. The Committee's report addresses
several important aspects of the conduct of monetary policy and the performance
of the Bank.'
'The report is based on discussions between the Governor of the Reserve
Bank and the Committee at a public hearing on 6 November last year.'
David Hawker MP, Chairman of the Committee, said 'With the Committee's
hearing with the RBA coming just after the onset of the Asian currency
crisis, the Government was pleased to hear that the RBA considered that
"We are in a much better position to handle this financial instability
than we have been at any stage, I think, in the last quarter of a century..."
'As the situation in Asia is changing almost on a daily basis, the Committee
will monitor events and discuss those matters again with the Bank at its
7 May hearing in Melbourne'.
Mr Hawker said 'In its interim report the Committee addressed the following
- the Asian monetary crisis and the support packages;
- the need for the Bank to evaluate its expectations of safety-net wage
decisions against the actual living wage claim outcomes and the changing
significance of the contribution of executive salaries component to
the average weekly ordinary-time earnings;
- current levels of growth in household indebtedness;
- early warning signs of declining bank lending practices to large corporations
and threats this will spill over to home lending and consumer finance;
- whether there are improvements in bank lending to small business;
- the RBA's sale last year of two thirds of its gold holdings;
- perceptions of conflict of interest of RBA board members;
- progress in reducing the time for cheque clearance and delays in the
introduction of the real time gross settlement system for large payments
- the banking industry's progress in addressing the "year 2000 problem";
- arrangements for the introduction of the new Australian Prudential
Ends // 23 March 1998 // Email: EFPA.Reps@aph.gov.au
David Hawker, MP (Chairman) Parliament House (02) 6277 4100
Bev Forbes (Inquiry Secretary) (02) 6277 4587
A copy of Mr Hawker's tabling speech follows.
An index to the report and a copy of the
report in PDF format are available on this site.
The report is also available by contacting the Committee
TABLING SPEECH: DAVID HAWKER MP, CHAIRMAN
Mr Speaker this is the fifth report of the Committee in this Parliament
and yet again I am pleased to say it is a unanimous report.
This interim report addresses aspects of monetary policy and prudential
supervision discussed between the Governor of the Reserve Bank of Australia
and the Committee at a public hearing on 6 November last year.
The Committee's work on the Reserve Bank is one of its most important
tasks and one which generates considerable public interest.
The appearances of the Reserve Bank before the Committee are an important
mechanism of accountability and transparency on the Bank's conduct of
That policy is operating well, with many of the economic problems that
were previously of concern having been eliminated, or brought under some
The RBA considers the major outstanding problem is the level of unemployment
- a matter of great concern to us all. While it predicted some further
slow progress in reducing unemployment over the next year, it reiterated
that while monetary policy would play a part in achieving that reduction,
in the long run, its part would only be minor. Structural changes will
also be important.
The Bank reported, like all central banks, it remained sensitive to
wage settings. The Committee recommends that the Bank evaluate its expectations
of safety-net wage decisions against actual living wage claim outcomes.
The Committee also recommends that the RBA, and the Australian Bureau
of Statistics, assess the changing significance of the contribution of
executive salaries component to the average weekly ordinary-time earnings.
The Committee's November hearing with the Bank was very timely, coming
just after the onset of the currency crisis in Asia. The hearing provided
valuable insights into the Bank's thinking on those crucial issues at
The Committee also looked at the potential impact of the Asian monetary
crisis. The Governor gave the Government a big tick, stating that 'We
are in a much better position to handle this financial instability than
we have been at any stage, I think, in the last quarter of a century...'
Much more will be said about that matter at our May hearing with the
RBA, particularly with respect to the impact on unemployment.
On the prudential side, the Deputy Governor reported that the RBA has
detected some early warning signs of declining bank lending practices.
While the RBA is more positive about improvements in bank lending to small
business than it has been in the past, the Committee is not quite as optimistic.
We will be looking closely at this issue again.
Other important matters addressed by the Committee were: the Bank's
gold sales last year; perceptions of conflict of interest of RBA board
members; cheque clearance procedures; the real time gross settlement system;
the "year 2000 problem"; the new Australian Prudential Regulation Authority;
and central bank cooperation.
The regional impact of competition reform within various sectors, including
the financial sector, was addressed in several of the Committee's recent
inquiries. In the Treasurer's recent response to the Committee's report
last year on the Australian Competition and Consumer Commission, the Government
agreed to a study of the economic impact on, and benefits to, rural and
regional Australia resulting from competition reforms. The Productivity
Commission is to undertake that study. The financial sector will no doubt
be addressed and I will be looking for the RBA's views on this matter
at our May hearing.
In undertaking this review the Committee appreciates the assistance
provided by the Reserve Bank, our adviser, and secretariat staff.
I also thank all the members of the Committee for their hard work at
the public hearing, and for their contributions to this interim report.
I commend the report to the House.
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