The House of Representatives Standing Committee on Economics (the committee) is responsible for scrutinising the Reserve Bank of Australia (RBA) and for ensuring its transparency and accountability to the Parliament, the community, and the financial sector.
Biannual appearances by the RBA Governor and senior RBA staff before the committee are important mechanisms within the RBA’s accountability framework. This framework was first established in the 1996 Statement on the Conduct of Monetary Policy, agreed between the then Treasurer, the Hon Peter Costello MP and then Governor of the RBA, Mr Ian Macfarlane, which clarified the relationship between the Government and the RBA and ‘provided for increased accountability through half-yearly reports on monetary policy and appearances by the Governor before a Parliamentary committee.’ This approach has been reiterated in subsequent statements on the conduct of monetary policy, with the latest noting:
…the Governor will continue to be available to report twice a year to the House of Representatives Standing Committee on Economics, and to other Parliamentary committees as appropriate.
The Treasurer expresses support for the continuation of these arrangements, which reflect international best practice and enhance the public's confidence in the independence and integrity of the monetary policy process.
The Governor’s appearances before the committee occur within the context of the committee’s ongoing reviews of the annual reports of the RBA, which also provide an important mechanism for promoting the transparency and accountability of the RBA. The Standing Orders of the House of Representatives provide for the referral of the annual reports of government departments and authorities tabled in the House to committees in accordance with the Speaker’s Schedule.
The RBA’s annual reports stand referred to the committee under this Schedule. The committee resolved to conduct an inquiry into the RBA’s 2019 Annual Report on 10 December 2019 and resolved to extend that inquiry to cover the RBA’s 2020 Annual Report on 23 June 2021.
Scope of the Review
The RBA appeared before the committee on five occasions during the period covered by the current report: 14 August 2020, 2 December 2020, 5 February 2021, 6 August 2021, and 11 February 2022. The hearings were broadcast over the internet through the Parliament’s website, allowing interested parties the opportunity to listen to proceedings. The transcripts of these hearings are available on the committee’s website.
The RBA had previously appeared before the committee on 7 February 2019 as part of the committee’s review of the RBA’s 2019 annual report. The Committee’s findings related to this hearing were tabled in March 2020 in the committee’s Review of the Reserve Bank of Australia Annual Report 2019 (First Report).
A list of RBA representatives who appeared before the committee at the public hearings can be found at Appendix A. The RBA’s responses to questions taken on notice during the hearings and questions in writing received following the hearings are available on the Committee’s website.
In the lead up to the public hearings, the committee received private briefings from prominent economists—Ms Joanne Masters, Mr Saul Eslake, Ms Catherine Birch, Mr Richard Yetsenga and Mr Stephen Walker. These briefings provided valuable background information and expert insight for the committee, aiding it in its discussions with the RBA at the public hearings. The committee extends its thanks to Ms Masters, Mr Eslake, Ms Birch, Mr Yetsenga and Mr Walker for their cooperation and assistance.
As well as being crucial forums to enhance the accountability and transparency of the RBA, the public hearings continue to bring issues of monetary policy and Australia’s macroeconomic performance to the forefront of public debate. These hearings are also important means for financial markets to be better informed on the current thinking of the RBA.
This report highlights the central matters raised during the public hearings and draws out issues raised in the RBA’s recent statements on monetary policy and its annual reports. These statements and the annual reports can be viewed on the RBA’s website.
The COVID-19 pandemic and associated lockdowns have been the defining factor in Australia’s economic performance over the last two years. The RBA’s monetary policy response to this and Australia’s broader economic trajectory on its way to recovery form the core focus areas of this report.