Monetary Policy and Recent Economic Developments

Reserve Bank of Australia

Responsible for:

  • Monetary policy and market operations
  • Payments system stability and efficiency
  • Financial system stability
  • Issuing Australia's currency notes
  • Banker to the government
  • Managing foreign exchange reserves

The objectives specified in the Reserve Bank Act (1959) are:

  • Stability of the currency
  • Maintenance of full employment
  • Economic prosperity and welfare of the people of Australia

Reserve Bank Board

  • Responsible for monetary policy and financial stability
  • Nine members: Governor, Deputy Governor, Secretary to the Treasury, and six external members
  • Meets first Tuesday, except January

How the RBA achieves its objectives

  • Inflation targeting regime since 1993: keep annual inflation between 2 and 3 per cent, on average, over time
  • CPI inflation is the target, but underlying measures show trends in ‘headline’ inflation
  • Monetary policy framework agreed with the government since 1996, most recently updated in 2016
  • RBA Board sets the policy interest rate (target for the cash rate – the rate banks charge each other for overnight funds)
  • RBA liquidity operations (altering the supply of overnight funds) ensure the cash rate remains at target
  • Changes in the cash rate affect lending and deposit rates and the exchange rate, which in turn influence private consumption and investment spending
  • Inflation will remain steady and low when total spending is kept close to the level of potential output over time
  • RBA transparency and accountability
  • Financial stability, which is critical to a stable macroeconomic environment, is a longstanding responsibility of the RBA
  • RBA promotes financial stability by managing and providing liquidity to the system, and chairing the Council of Financial Regulators
  • RBA participates, where appropriate, in the development of financial system policy
  • Payments System Board has explicit regulatory authority for payments system stability
  • Regular publications of RBA's analysis on financial stability matters
Graph 1
Graph 1: Global Economic Activity
Graph 2
Graph 2: Global Inflation
Graph 3
Graph 3: China - Contributions to GDP growth
Graph 4
Graph 4: China - Iron Ore and Coal
Graph 5
Graph 5: China - Residential Property Indicators
Graph 6
Graph 6: Commodity Prices
Graph 7
Graph 7: Terms of Trade
Graph 8
Graph 8: GDP growth
Graph 9
Graph 9: Mining and non-mining activity
Graph 10
Graph 10: Household Indicators
Graph 11
Graph 11: Household income, consumption and wealth
Graph 12
Graph 12: Wealth growth and unemployment
Graph 13
Graph 13: Labour market indicators by region
Graph 14
Graph 14: Private residential building approvals
Graph 15
Graph 15: Housing loan approvals and credit
Graph 16
Graph 16: Housing loan approvals by state
Graph 17
Graph 17: Housing price growth by dwelling type
Graph 18
Graph 18: Rent inflation
Graph 19
Graph 19: Consumer price inflation
Graph 20
Graph 20: Tradable and non-tradable inflation
Graph 21
Graph 21: Trimmed mean inflation forecast
Graph 22
Graph 22: Cash rate