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Tuesday, 28 October 2014
Page: 12217

Ms O'DWYER (Higgins) (12:14): On behalf of the Standing Committee on Economics I present the committee's report entitled Review of the Reserve Bank of Australia annual report 2013 (third report), together with the minutes of proceedings and evidence received by the committee.

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

Ms O'DWYER: by leave—I am pleased to present the third report for the Economics Committee's review of the Reserve Bank of Australia Annual Report 2013. This report follows a hearing with the governor and other officials of the Reserve Bank on 20 August 2014 in Brisbane.

The RBA has recently forecast Australia's trading partner growth to be a little above its long-run average, assisted by strong export trade to China. It is encouraging also that the expectations have risen for improved growth in the advanced economies.

At the August hearing, the Reserve Bank governor estimated Australian growth at two to three per cent of GDP over the year ahead. He commented that our near-term growth may be slightly below recent trends but could increase above trend in the future.

The RBA continues to hold the official cash rate at 2½ per cent, which it has maintained since August 2013. This decision is due in part to a continuation of favourable financial conditions and also to adequate capital inflows to market economies. The governor commented that lowering cash rates was unlikely to encourage growth in the current environment but could be considered in the right circumstances.

There is currently very low volatility in financial prices. The governor has also stated previously that markets are not anticipating global interest rate rises or other adverse events in the period ahead.

The exchange rate continues to remain high by historical standards. The governor noted at the hearing that Australia has undergone a positive rerating by global capital markets over the past five to ten years. This has contributed significantly to the high Australian dollar.

The unemployment rate has increased slightly in recent months. Reversing this trend is likely to take some time despite improvements in labour market indicators. The labour market is responding to these conditions with slower growth in wages and there are indications of a lower unemployment rate into the future which is to be welcomed.

The committee sought the governor's views on the circumstances in which interventions to address rapid price increases in Australian housing, particularly in the major capitals, could be warranted. He noted that in addition to leverage and lending standards, macroprudential tools could be considered if the economic or financial risk of these price rises became sufficient.

The committee gauged the views of the RBA on credit issues facing small businesses. The governor commented that this warrants further discussion as it is an acknowledged problem for smaller enterprises with no obvious or magic-bullet solution. The governor further noted that small businesses employ the bulk of the Australian workforce and will continue to enhance employment and economic activity as long as the opportunities and incentives remain in place for risk-takers and entrepreneurs.

On behalf of the committee I would like to thank the Governor of the Reserve Bank, Mr Glenn Stevens, and other representatives of the RBA for appearing before the committee on 20 August 2014. I would also like to thank the secretariat and committee members for their work on this report.

I commend the report to the House.