Mr BOWEN (1:15 PM) —As Deputy Chair of the Standing Committee on Economics, Finance and Public Administration, I am pleased to support the remarks of the chair in tabling the committee’s report entitled Review of the Reserve Bank of Australia annual report 2004 (2nd report). In February, when the committee last had the Governor of the Reserve Bank before it, there was considerable speculation and interest regarding the possibility of interest rates increasing. Not long after that hearing, the bank moved to increase interest rates by 25 basis points. The interest and speculation in relation to this hearing was of a different nature. On this occasion, the bank had indicated in its statement on monetary policy that the stance of monetary policy was returning to neutral. The Governor of the Reserve Bank was at pains to point out to the committee that this means that the chances of the next movement in interest rates being up or down are 50 per cent for both.

This matches the views of the market, with analysts apparently evenly divided on whether the next movement in interest rates will be up or down. The governor indicated to the committee that the bank longer feels that there is an upward risk to the bank’s inflation target. The bank feels that inflation will peak in the second half of next year. Of course the question is whether it will peak above the bank’s target range for inflation. There are some worrying signs in the economy, including the latest labour market figures which were released the week after the committee hearing, that perhaps inflation is still heading in an upward direction.

I would like to take a few moments to briefly comment on the issue of whether the RBA should have issued public comments in relation to misleading statements in certain political pamphlets in the lead-up to the last election. The Reserve Bank was clearly of the view that these pamphlets were misleading. It wrote two strongly-worded letters in relation to the pamphlets in question: one to the authoriser of the pamphlets and the other to the Australian Electoral Commission. However, the bank did not make a public statement disassociating itself from references to it as the source of some quite provocative statements on interest rates.

As I pointed out to the governor, the bank has made statements correcting the record in the past. I want to emphasise that in my view the governor and the bank were not politically biased and in no way acted improperly. However, I do believe that they made the wrong decision. They should have publicly clarified that the bank is not a source of views on interest rates and that the bank has no view on which party is a better manager of the economy. I would encourage the bank to inform political parties before the next election that it will not tolerate its name being used in political pamphlets and that if there is any repeat of the bank being incorrectly quoted as a source for political pamphlets it will publicly correct the record, regardless of the stage of the political cycle.

The committee, as usual, took some time to question the governor about the payment system, particularly the impact of recently announced Reserve Bank reforms. In February 2005 the Payments System Board released draft standards for the EFTPOS and Visa debit systems for public comment. The proposed standards seek to address the distortions and costs of using different types of payments. From a personal point of view, my position would normally be that the market should be left to determine such matters and that regulation is likely to distort the market in such a way that nobody wins. However, I agree with the bank that the American experience is such that regulation is warranted.

The market does not operate efficiently unfettered, because of a lack of information for consumers as to the true cost of using a card with high merchant costs but lucrative reward schemes when these costs are not passed on to consumers. The question is whether the reforms are the best way of ensuring an efficient and transparent system. The jury is out on this decision—for example, of exempting American Express and Diners Club cards from the requirements that other cards have in return for concessions and undertakings in relation to not prohibiting merchants from encouraging customers to use a cheaper card. I regard myself as an agnostic on this issue, and I think it is too early to tell whether the criticisms of the bank’s approach are valid or not.

I think that early next year we will have a clearer picture of the impact of the bank’s reforms, and I am glad that the committee has decided to revisit the issue next year by holding a public forum for all those interested to comment. In conclusion, I thank Mr Peter Keele, the committee secretary, and all the committee staff for their support, as usual, in the lead-up to this report. I commend the committee’s report to the House.

The DEPUTY SPEAKER (Hon. IR Causley)—The time allotted for statements on this report has expired. Does the member for Cook wish to move a motion in connection with the report to enable it to be debated on a future occasion?