Ed Husic (Chifley, 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 2024, together with the minutes of the proceedings.

The Standing Committee on Economics' biannual hearings with the Reserve Bank of Australia have been an important mechanism to provide parliamentary scrutiny of the functions and decisions of Australia's central bank for nearly 30 years.

The hearings offer an opportunity for the parliament, and for Australians more broadly, to better understand the conduct of monetary policy and the Reserve Bank's assessment of current economic conditions and the outlook ahead.

Importantly, the committee had a chance to explore the progress implementing the most significant reforms to the RBA in more than three decades—more about that later.

Today, I'd like to focus on monetary policy over the period covered by the report.

At the time of the hearing on 22 September 2025, inflation had fallen from its 2022 peak of 7.8 per cent and sat between two and three per cent, while unemployment remained low at 4.2 per cent. Additionally, the RBA had eased monetary policy over the course of the year, reducing the cash rate by 75 basis points to 3.6 per cent. The unemployment rate of 4.2 per cent was low by historical standards, and 1.1 million more Australians were in employment than in mid-2022. Gross domestic product per capita had superseded pre-COVID levels.

Beyond monetary policy, the committee examined a wide range of issues relating to Australia's current economic position. For instance, the Reserve Bank reiterated to the committee that Australia is not immune from the global trend of subdued productivity growth.

A range of factors influencing changes to the productivity rate were discussed, including COVID, growth in non-market sectors, business dynamism and productivity in the mining sector. The committee heard that opportunities for productivity growth in Australia exist in areas such as renewables and artificial intelligence.

Global developments were also covered. The committee was told by the governor we had witnessed a marked step-change in the world trading system, but explained that, as also emphasised in the August statement on monetary policy, the predicted impact of trade instability on the global economy had not materialised fully.

However, these dynamics warrant vigilance given potential spillovers to Australian demand, inflation and financial conditions, and the RBA continues to monitor risks to Australian economic growth.

The governor also provided an overview of inflation overseas, commenting that some countries, such as the United Kingdom, continue to face price pressures while other countries such as Canada were observing low inflation but with rising unemployment rates.

It was also the RBA's first appearance since the amended Reserve Bank Act 1959 came into force on 1 March 2025, creating a new monetary policy board and a separate governance board in line with the recommendations of the government's review of the RBA.

The reforms undertaken to the RBA have strengthened transparency, enhanced the quality of public communication and improved the governance structure of the institution. The establishment of separate boards has enabled a clearer focus on monetary policy and institutional oversight.

The RBA spoke to its commitment to strengthening its modelling, scenario analysis and forecasting capabilities, designed to support more robust policy formulation and ensure the bank remains responsive to emerging developments.

Other significant themes canvassed through the hearing included the RBA's work to improve the efficiency and competitiveness of the payment system through its review of retail payments regulation. Given the wide interest in this space, the committee will examine related matters in its inquiry into schemes, digital wallets and innovation in the payments sector, with public hearings set for 24 and 25 February.

Reflecting a widespread contemporary focus on the growing impact of artificial intelligence, the committee discussed potential benefits and effects on businesses and on the economy more broadly.

The committee also explored how technological innovation continues to transform the landscape within which the RBA performs its functions, from how the bank operates to its approach to research. These issues will continue to shape the RBA's work and the committee's future oversight.

The House Standing Committee on Economics continues to monitor the conduct of monetary policy, given its impact on members of the community and the important role that the RBA and its monetary policy conduct plays in broader economic management.

Finally, I thank the secretariat for their diligent preparation and ongoing support to committee members through this review, and I extend my thanks to the entire committee membership. All their work is deeply appreciated.

Simon Kennedy (Cook, Liberal Party) Share this | Link to this | Hansard source

I'd like to pick up where the chair left off. It has been a pleasure to work on this committee with the chair. He has done a remarkable job keeping the committee structured and helping it tackle pressing issues for this country, like the cost of living, monetary policy and the Reserve Bank. The secretariat has been fantastic and all members have been fantastic. It has been a very well-functioning, good, bipartisan committee.

But, in these committee hearings where we talk about technicalities, Reserve Bank boards and monetary policy, it can be easy to forget what it's really about. Just a few weeks ago, I was meeting with a single mother in Sans Souci. As a result of the now 13 interest rate rises under this government, she has had to give up her apartment because she can no longer service the mortgage. She had tears in her eyes as she was telling me of the anguish of losing her deposit and having to go back to renting again. This is the face of the decisions we make in here on fiscal policy and the decisions the Reserve Bank makes on monetary policy. Yes, it's true we're facing a productivity crisis. We must lift productivity so Australians can become wealthy again, because right now there is essentially a speed limit on our economy.

Growing anything over two per cent leads to inflation, and we have seen that with 13 interest rate rises under this government. Most recently, the Reserve Bank increased the cash rate from 3.6 per cent to 3.85 per cent. Australians don't need any reminder of what this means in practice—higher mortgage repayments and higher rent. We're living in this cost-of-living crisis with interest rates rising and energy costs remaining elevated. Living standards are under pressure, and Australians are getting poorer. Therefore, the committee has essential roles in examining these problems. First, we must ensure the Reserve Bank is explaining its decisions transparently and credibly. Second, we must ensure the government's policy settings are not working at cross-purposes with the bank's task of bringing inflation under control.

The federal government spending, as a share of GDP, is at an almost 40-year high. It is at 26.9 per cent of GDP. The last time it was higher than this was in 1986. The fact is, since 1986, we have been increasing government spending, and it is at an all-time high. We heard the Reserve Bank governor admit this is putting pressure on aggregate demand and putting pressure on inflation and forcing them to raise interest rates.

There is a growing number of respected economists who have been very clear on this point. Stephen Smith from Deloitte Access Economics, Shane Oliver from AMP, Paul Bloxham from HSBC and Alex Joiner from IFM Investors have all warned, time and time again, that elevated spending adds to inflationary pressure, complicating the Reserve Bank's job. Yet, last Tuesday, in this very House, Treasurer Chalmers tried to deny this link. He got up and sat at this very dispatch box and said, 'The Reserve Bank governor's statement does not mention government spending at all.' He went on to say it played no role in their decision to raise interest rates.

Unfortunately, that statement stands in stark contrast with what Governor Bullock said to the committee just last week. She said very clearly and unambiguously that 'it is mathematically correct to suggest government spending is contributing towards higher inflation'. These two positions cannot both be right. The committee will continue to test, in evidence, what the bank believes the economy can sustainably absorb, where capacity constraints are binding, where cost pressures are not moderating fast enough and what we can do as the federal government, in charge of fiscal policy, to actually help these settings.

Yesterday, I saw Treasurer Chalmers on Insiders, and, after 3½ years in the role, I thought he would have had a handle on this. But, unfortunately, Treasurer Chalmers was mistaking the growth rates for public and private demand. In that, he said that 'actually, private demand is growing faster than public demand', but the data shows the exact opposite. In the September quarter, public demand grew by 1.2 per cent, private demand by 1.1 per cent. We need a treasurer who is across these numbers. We need him to do better. (Time expired)