Business Liaison Program

The Reserve Bank of Australia maintains offices in Perth, Brisbane, Melbourne and Adelaide. Economists in these offices conduct liaison with individual firms and agencies, in the private and public sector, in order to analyse economic conditions throughout Australia. Their regional economic intelligence forms part of the assessment of the Australian economy that influences the Bank's the monthly monetary policy decision and it contributes to the Bank's forecasts for economic growth and inflation.

Transcript

Virginia Christie, Senior Representative at Reserve Bank of Australia

The Liaison Program is the way in which the Reserve Bank's been able to extend its presence in the Australian community. And so there was a recognition that it was important for the Bank to engage with the business community and to feed messages from the business community into that one very important decision on interest rates. So in 2001 we established state offices in Perth, in Adelaide, in Melbourne, and in Queensland and our Head Office is here in Sydney, and the idea was that by being on the ground we would be able to introduce more concepts and more information about what's happening in the economy and that just helps make better informed decisions on economic policy.

There are a couple of big advantages by having the Liaison Program; firstly the information that we get from the business contacts is highly relevant because decisions that they make today will lead to economic outcomes tomorrow, so you can't get much better than that and secondly it's very timely so it often gives us insights into how the official statistics are going to be playing out. And a good example of this is our retail liaison, so we meet with key firms across the whole of Australia or we speak to them every month and by doing that we're getting an on the ground assessment of not only how they're going but what their future plans are. And this information comes out about two to three weeks before the official statistics are released, so when it comes down to policy you know that's a huge advantage.

The Liaison Program is intended to be as far reaching as possible, so when we select our liaison participants for the program we are trying to ensure that we have a good cross section of contacts who are representative of conditions in their sector or industries, so we don’t necessarily only want to speak to the big firms in the mining sector, but it's important for us to understand what's happening in the tourism sector, education, manufacturing, so we ensure that we have that broad spread. And because we're speaking to large firms it's still important for us to understand what's happening with small businesses. There are too many small businesses for us to meet, so what we do we organise round table discussions with a group of small businesses on a fairly regular basis across the states and also in Head Office Sydney.

Well we're trying to seek firm specific information, and we're wanting not only to understand whether firms are going to be increasing or decreasing investment or wages or the like, we also want an understanding of the reasons why they're doing this because this adds to the richness of the information. And I think a good example of this was during the Global Financial Crisis in 2008, so there was a lot of pessimism around about future prospects for Australia, and rightly so at the time, but when we spoke to our contacts we started to get an understanding that in actual fact the first thing they were going to do wasn't to reduce the number of jobs in their workforces, they wanted to retain flexibility in the workplace and so they reduced hours worked, and they encouraged people to take accumulated leave and the reason they did this was because when growth resumed at whatever point that might have been they didn't want to be in a position where then they had to look for new employees and go through the same problems that they actually did during the boom period. So we wouldn't have had those great insights if it wasn't for the Liaison Program.

The information from the Liaison Program gets used in a variety of ways, it gets incorporated into information that's used in Head Office for the forecasts, but because it's so timely and because it's giving us these very insightful views on how things might be playing out into the future, we have learnt about so many different things in the economy and a good example of this is with the mining investment boom. So we had the privilege of being able to speak to mining firms and mining firms gave us information about their investment plans into the future and when we joined the dots together, we realised that this mining investment boom was going to be much larger in magnitude than what we'd envisaged, and also for that reason for what anyone else was thinking at the time. So this gave the Reserve Bank some time to step back and think about the implications of this mining investment boom on the rest of the economy and what policy responses should or shouldn't be taken as a result of that. So we wouldn't have been able to get those insights if it wasn't for the mining Liaison Program.

Another great example was with the natural disasters, the Queensland floods and cyclones in 2010 and 2011, and so when it came to bear then we phoned our contacts, we got on the phone and we spoke to them and said well look, how's this playing out. And it wasn't just a matter of understanding what damage was done, but it was also a matter of understanding what responses were going to be put into place, and how long it was going to take. And what we learnt from this process was that coal production was going to be affected in quite a large way and the reason for that was that the coal mines were flooded, so the mines, they had to extract the water from the mines before they could resume production again, and that took a lot longer than it was initially thought. So that affected output growth in the economy and then by activating our agricultural contacts we realised there was lost production and that was going to also affect output growth, but the big impact on lost agricultural production was actually through prices and its impact on the Consumer Price Index which is very important for the Bank, you know, because it's an indicator of inflation and we're an inflation targeting central bank.