Chapter 1 Introduction

Background

1.1                   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.

1.2                   The RBA Governor’s appearances before the committee at biannual public hearings are an important element of the Bank’s accountability framework. The details of this framework are set out in the Fourth Statement on the Conduct of Monetary Policy, agreed between the Treasurer, the Hon Wayne Swan, MP, and the RBA Governor, Mr Glenn Stevens. The statement formalises the biannual appearance before the committee. The statement, which is reproduced at Appendix C, states:

The Governor has also indicated that he plans to continue to be available to report on the conduct of monetary policy twice a year to the House of Representatives Standing Committee on Economics, Finance and Public Administration. The Treasurer expresses continuing support for these arrangements, which ensure the continued transparency and accountability of the Reserve Bank’s conduct of monetary policy—and therefore the credibility of policy itself.[1]

1.3                   A second procedural mechanism for achieving this accountability is set out in the Standing Orders of the House of Representatives, which provide for the referral of annual reports within a committee’s area of portfolio responsibility for any inquiry the committee may wish to make. Accordingly, the committee may inquire into aspects of the annual reports of the RBA.

Scope and conduct of the review

1.4                   The first public hearing of the committee with the RBA during the 42^nd parliament was held in Sydney on 4 April 2008.

1.5                   The proceedings of the hearing were audio streamed over the internet through the Parliament’s website, allowing interested parties to hear the proceedings as they occurred. The Governor’s opening statement was taken as a submission and the transcript of the hearing is available on the committee’s website.[2]

1.6                   Before the hearing, the committee received a private briefing from Mr Kieran Davies, Chief Economist, ABN-AMRO. This briefing provided valuable background information for the committee and perspectives on issues for discussion at the public hearing. The committee appreciates Mr Davies’ cooperation and assistance.

1.7                   The committee also appreciates the provision of additional briefing material from Mr Kali Sanyal of the Parliamentary Library Research Service.

1.8                   The hearing was well attended by members of the public and staff and students from East Hills Girls Technology High; Sydney Secondary College; Newington College; Fort Street High; Caringbah High and Methodist Ladies College.

1.9                   The public hearings with the RBA continue to bring issues of monetary policy into the public arena, and also have assisted in providing a public face to parliamentary committees and the RBA. The committee welcomes the Governor’s frank and open comments at the hearings. In addition, the hearings are an important means whereby financial markets can be better informed on the current thinking of the RBA.

1.10               The report focuses on matters raised at the public hearing, and also draws on issues raised in the RBA’s Statement on Monetary Policy. The Statement on Monetary Policy may be viewed through the RBA’s website.[3]

Next public hearing with the RBA

1.11               The committee will conduct the next public hearing with the RBA on Monday, 8 September 2008 in Melbourne. More details will be circulated in the weeks leading up to the hearing.