David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

On behalf of the Standing Committee on Economics I present the committee's second report on the review of the Reserve Bank of Australia's annual report 2015, together with the minutes of proceedings.

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

by leave—On 6 September 2016 the Reserve Bank decided to leave the cash rate unchanged at 1.5 per cent, after reducing official interest rates by 25 basis points to 1.5 per cent on 4 August 2016. In making this decision, the governor said that holding the stance of monetary policy at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time, after cutting the cash rate at both the May and August meetings.

At the public hearing on 22 September of this year, the governor stated that the Australian economy is continuing to transition out of the mining boom, with growth in the non-mining sectors of the economy being supported by flexibility in the exchange rate and an accommodative monetary policy. The RBA forecasts that year-ending GDP growth will be around 2½ to 3½ per cent over the year to December 2016, increasing to around three to four per cent by December 2018. The governor remarked that growth in the economy has been better than expected, due in part to an expansion in resources exports in recent months. The unemployment rate has remained around half a per cent lower than a year ago, and the RBA suggests that employment growth will continue at a modest pace with little change in the unemployment rate. Inflation remains very low, with the CPI expected to rise by half a percentage point to 1½ per cent by December 2016, and to 1½ to 2½ by June 2017.

While the Australian dollar has appreciated by around 10 per cent against the US dollar, and was 8 per cent higher on a trade-weighted index basis than its low point in September 2015, the Australian dollar remains 20 per cent lower against the US dollar and about 12 per cent lower on a trade-weighted index basis than its peak in the middle of 2014. The RBA has noted that, at its current level, the Australian dollar is supporting demand for local goods and services, with more Australians choosing to holiday domestically and more international students choosing to study in Australia.

On behalf of the committee, I would like to thank and congratulate the new Governor of the Reserve Bank, Dr Philip Lowe, and also thank other representatives of the RBA for appearing at the hearing on 22 September 2016. Finally, I would also like to take this opportunity to thank the outgoing governor, Mr Glenn Stevens, on his 10 years of tremendous service to the Reserve Bank. I commend the report to the House.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

by leave—This report details the Economics Committee's deliberations in respect of biannual public hearings with the Reserve Bank of Australia governor, and it is an important element of the RBA's accountability framework. On behalf of the Labor members of the committee, I join with the government in congratulating Dr Philip Lowe on his appointment as the Reserve Bank governor and the smooth transition that he has made into this new role. He has big shoes to fill in the wake of the position being vacated by former governor Glenn Stevens. I think that Dr Lowe is slowly demonstrating that he is going to be a steady hand with management of monetary policy in the Australian economy, with an eye to the future. We look forward to working with him over the coming years.

The hearings with the Reserve Bank governor and the two deputy-governors canvassed many issues, including the seventh statement on the conduct of monetary policy. There was a lengthy discussion regarding the cash rate and its stickiness, in respect of the major banks passing on in full interest-rate deductions or reductions in the cash rate. There was discussion regarding the exchange rate, the soft conditions in the labour market and also the patchiness of the Australian housing market, in particular the steam that we have seen in the market in Sydney and Melbourne. Interestingly, the Reserve Bank governor pointed out the concern that, like many parents, he has about whether or not his children will be able to afford to buy a home in the future, particularly in the community that they have grown up in. He expressed the view that this was an issue of supply and something that policy settings should be aimed at and levered towards, in terms of generating more supply of housing into the future.

The governor also made some interesting observations with respect to infrastructure, and his view that there is a great opportunity for governments in Australia at the moment to take advantage of lower interest rates to invest in the future and build productive infrastructure. He said, 'Someone in the economy has to be prepared to use the low interest rates. Government can do that, or it can facilitate the private sector to do that on infrastructure. As the G20 has repeatedly emphasised, it is creating an environment in which the private sector wants to take advantage of low interest rates.' That is the view of the Reserve Bank governor, implying that we are not getting enough investment in infrastructure in Australia and that government should be looking to take advantage of low interest rates to build productive infrastructure that will increase the productivity of our nation and spur growth into the future. These are comments that, I must say, many of the Labor members on the committee agree with.

There was also an interesting discussion of the role of the big banks, in particular the big four, in recent times: their interest-rate practices, their return on equity, and their practices with respect to credit cards and insurance. The governor was quite critical of some of the bonuses and incentive-based cultures in some of the Australian banks, which he said needed to return to being a strong service profession rather than a marketing business. In our view, this added further weight to the need for a royal commission into the banking sector in Australia.

The final point I would like to make is about the census. The Reserve Bank governor, after a question from me, did admit that there was a concern about the stuff-up with the census this year and the fact that the data that we will get from this year's census will never be as good as that from previous censuses. It is something that is a concern for government because so many policies and so much planning by governments and the private sector relate to the data that comes from the census. The Reserve Bank governor said: 'I think it is a concern for us all, isn't it? Many areas of government and in the private sector rely on these data to allocate resources and make decisions. It is a concern for all of us.' That is the view of the Reserve Bank governor about this government's approach to the census, and I think that says it all. Recently in estimates, on 19 October, it was admitted by David Kalisch from the ABS that the mess-up with the census over this past year has already cost the government $20 million to try and fix it, and possibly $10 million more. So we are going to get the weakest set of data that we have ever had from a census, and it has cost the Australian taxpayer close to $30 million. It says it all about this government and its management of our economy.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

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