Julie Owens (Parramatta, Australian Labor 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 2012 (first report), together with the minutes of proceedings.

In accordance with standing order 39(f) the report was made a parliamentary paper.

by leave—Last year the global economy faced some serious downside risks. These included the US fiscal cliff, China's slowdown and instability in the Eurozone. These risks were not fully realised and as the governor noted 'a truly disastrous outcome was avoided'.

The governor was generally optimistic about the global economic outlook. World GDP is forecast to grow at 3½ per cent in 2013 before picking up to four per cent in 2014. If managed satisfactorily, the US economy has a good chance of delivering an upside surprise. The slowdown in China's economy has ended and the medium-term outlook is for a steady pace of growth.

On the downside, the governor cautioned that Europe still faces immense economic challenges. In the longer term the governor noted that it was unclear how the global economy would react when countries like Japan and the United States tighten monetary policy.

Domestically the economy is slightly weaker than was forecast by the RBA in November 2012. The downwards revision reflects the impact of fiscal consolidation, the high level of the Australian dollar, the expectation that mining investment will peak and weakness in non-mining business investment. However, growth is expected to pick up in 2014.

There will be some tough structural adjustments in the Australian economy over the years ahead. However, as businesses and governments adapt to the new conditions, productivity in Australia will be further strengthened.

Forecasts continue to embody a gradual recovery in dwelling investment and non-mining business investment. The sentiments of households have improved and consumer demand is expected to increase. Over the next few quarters underlying inflation is expected to remain at an annual rate of 2½ per cent.

The cash rate has been reduced six times over the last 16 months, for a decline of 175 basis points. As a result, lending rates have fallen to near-historic lows. The governor indicated that the effects of monetary policy are flowing through the economy, with share prices increasing and 'safe assets', such as bonds and bank deposits, decreasing. The governor confirmed that at present the board has 'a bias to ease' on rates.

Finally, 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 attending the hearing on 22 February 2013. Once again, I thank the other committee members and the secretariat for their work on this report. I commend the report to the House.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

by leave—On behalf of the coalition I am pleased to rise to speak to the review of the Reserve Bank of Australia annual report 2012. Like the chair of the committee, coalition members are exceedingly grateful to the committee secretariat for their support but, most importantly, to the governor of the Reserve Bank and his senior executives for making themselves available twice annually to appear before the House of Representatives Standing Committee on Economics.

This committee represents in many respects the interface between the parliament and, through the parliament, the Australian people when it comes to monetary policy. There is no doubt considerable concern—not only in Australia, but we of course are most focused on Australia—about what is happening with respect to monetary policy and, generally, the fiscal and monetary outlook globally. The committee had the opportunity to touch upon a number of these aspects in the testimony provided by the Reserve Bank governor. In particular, questions were put to the governor about a range of matters. For coalition members, our concern about the acute levels of debt and deficit that the federal Labor government has accrued in a short period of time remains central to our questioning. We remain concerned about whether or not fiscal policy is sustainable. We remain concerned about the context in which that is happening and, therefore, the forecasts and projections put forward by the Reserve Bank with respect to the global economy.

Of particular concern to me is forecasts, and this formed part of my questioning to the Reserve Bank governor, because we have seen such significant swings in forecasting. For example, we had this year the Treasurer of Australia, the member for Lilley, indicate that he would deliver a $1.2 billion budget surplus, which we now understand is on track to be yet another $15 billion or $16 billion deficit. In addition to that, last year the Treasurer announced that there would be a $22 billion deficit, which ended up in fact being a $44 billion deficit—a 100 per cent blow-out in the size of the debt that the Labor government accrued. Our concern as members of the coalition was the extent to which these projections on the fiscal policy impacted on the development of monetary policy. We know that the federal government is crowding out the private sector when it is borrowing over $110 million every single day to feed its reckless spending.

I would highlight that the member for Higgins made some very important inroads with respect to the Reserve Bank's reserve fund and questioned the appropriateness of the Treasurer calling in a $500 million dividend from the Reserve Bank at a time when the Reserve Bank governor indicated that it was his preference to retain these funds within the Reserve Bank to make sure it had an adequate arsenal for any future challenges it would face. One concern that was very deftly put forward by the member for Higgins was the impact of the Treasurer reaching into the Reserve Bank's pocket and ripping out $500 million that this government clearly needs to help backstop its largesse when it comes to the amount of money it is spending.

So, these were two particular points that the coalition members questioned the Reserve Bank governor on. We are grateful that he once again proved himself to be a man of deft talent when it came to answering or not answering questions. That notwithstanding, we are always exceptionally grateful for his support of the role and the accountability of the Reserve Bank back to the parliament, and in that respect I certainly commend the report.

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Kirsten Livermore (Capricornia, Australian Labor Party) 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 a later hour.