House of Representatives Committees

Standing Committee on Economics, Finance and Public Administration

Review of the Reserve Bank of Australia annual report 1996-97

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 us all.'

'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 important matters:

Ends // 23 March 1998 // Email: EFPA.Reps@aph.gov.au

Further information:
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 secretariat.

 

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 monetary policy.

That policy is operating well, with many of the economic problems that were previously of concern having been eliminated, or brought under some reasonable control.

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 that time.

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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