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September 2007
Canberra
© Commonwealth of Australia 2007
ISBN 978-0-642-79007-1 (printed version)
ISBN 978-0-642-79008-8 (HTML version)
Chairman's foreword
Membership of the Committee
Terms of reference
List of abbreviations
Chapter 1 Introduction
Chapter 2 Monetary policy and other issues
Appendix A – Submission
Appendix B – Hearing, briefing, and witnesses
Appendix C – Third statement on the conduct of monetry policy
Appendix D – Glossary of terms
The August 2007 hearing was conducted in the light of a strong domestic economy but at the same time some volatility on global markets as a result of growing problems in the US sub-prime mortgage market.
The rising delinquency rates in the sub-prime mortgage market have resulted in a sharp fall in prices to mortgage backed securities and collaterised debt obligations which created problems for the holders of these products. A range of central banks acted during this period to increase liquidity in the banking system.
Notwithstanding these problems, the RBA reported that global growth remains strong. The RBA stated that ‘while there has been a slowing in the United States, this has so far been largely confined to the housing sector, with the wider economy still growing at a reasonable pace.’
The June quarter CPI figures revealed an increase in inflation. The RBA raised its December 2007 underlying inflation forecast to 3.0 per cent, the top of its target band. On 8 August the RBA, based on the new inflation data and other information, raised rates by 25 basis points to 6.50 per cent.
The committee examined the RBA on the accuracy of its inflation forecasts in view of the fact that its August forecast for December 2007 inflation was 50 basis points above its May forecast. The RBA Governor explained that while there was a pick up in inflation during 2006, one quarter revealed a softer figure. It was not clear whether that was a new trend or an aberration. Notwithstanding this, Mr Stevens concluded that ‘ongoing strength of demand in a fully employed economy might leave us with inflation pressure that is harder to manage than expected.’
In conclusion, I take this opportunity to say a personal farewell. The public hearing held on 17 August 2007 was my final hearing as Chair of the committee as I will not be standing for re-election at the forthcoming 2007 election. I have thoroughly enjoyed the responsibility and challenge of being Chair of the committee and appreciate the contribution of my fellow committee members.
The Hon Bruce Baird MP
Chair
Chair |
Hon Bruce Baird MP |
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Deputy Chair |
Ms Sharon Bird MP (from 1 March 2007) |
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Members |
Mr Steven Ciobo MP |
Mr Stewart McArthur MP |
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Dr Craig Emerson MP |
Mr Patrick Secker MP |
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Ms Sharon Grierson MP |
The Hon Alex Somlyay MP |
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Mr Michael Keenan MP |
Mr Lindsay Tanner MP |
Secretary |
Mr Stephen Boyd |
Research staff |
Ms Sharon Bryant |
| Administrative Officer | Ms Natasha Petrovic |
| Ms Frances Wilson |
The House of Representatives Standing Committee on Economics, Finance and Public Administration is empowered to inquire into, and report on the annual reports of government departments and authorities tabled in the House that stand referred to the Committee for any inquiry the Committee may wish to make. The reports stand referred in accordance with the schedule tabled by the Speaker to record the areas of responsibility of the Committee.
CAD |
Current Account Deficit |
CPI |
Consumer Price Index |
GDP |
Gross Domestic Product |
GST |
Goods and Services Tax |
RBA |
Reserve Bank of Australia |
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