Reserve Bank of Australia Annual Report – 2008
Accountability and Communication
Relationship with Government
Section 11 of the Reserve Bank Act 1959 sets out the relationship between the Australian Government and the Reserve Bank Board. It confers substantial independence on the Board, but balances this with an obligation to inform the Government of its policies ‘from time to time’ and a requirement for Parliamentary accountability. The regular meetings of the Governor, Deputy Governor and senior officers with the Treasurer shortly after Board meetings serve to keep the Government informed.
The Reserve Bank is a Commonwealth authority for the purposes of the Commonwealth Authorities and Companies Act 1997 (CAC Act) and, for these purposes, the members of the Reserve Bank Board are the directors of the Reserve Bank. As such, they are responsible for the preparation of the annual report and, at the meeting of the Board on 5 August 2008, they resolved that the Chairman sign the annual report and financial statements as at 30 June 2008, transmit them in accordance with the requirements of the CAC Act and arrange publication.
The House of Representatives Standing Committee on Economics (formerly the House of Representatives Standing Committee on Economics, Finance and Public Administration) has, in its Standing Orders, an obligation to review the annual report of the Reserve Bank and the annual report of the Payments System Board. The Committee holds twice-yearly hearings, at which the Bank presents its views on the economy and responds publicly to questions from Committee members. In 2007/08, the Governor, Deputy Governor and senior officers attended hearings on the Gold Coast in August 2007 and in Sydney in April 2008. These appearances, and the quarterly Statement on Monetary Policy, are important elements of the arrangements embodied in the understandings between the Governor and the Treasurer outlined in the fourth Statement on the Conduct of Monetary Policy, which was issued in December 2007 following the election of the new Government.
During the past year, senior staff of the Reserve Bank also provided evidence before Federal Parliamentary committees conducting various inquiries. These included the Senate Standing Committee on Economics Inquiry into Private Equity Investment, in July 2007; the House of Representatives Standing Committee on Economics, Finance and Public Administration Inquiry into Home Lending Practices and Processes, in August 2007; the Senate Select Committee on Housing Affordability, in April 2008; the Senate Select Committee on State Government Financial Management, in July 2008; and the House of Representatives Standing Committee on Economics Inquiry into Competition in the Banking and Non-banking Sectors, in August 2008.
The Reserve Bank views it as very important to ensure a high degree of transparency about its goals, decision-making processes and the analysis and reasons behind policy decisions. Transparency not only facilitates the accountability of an independent central bank in a democracy, it also increases the effectiveness of monetary and other policies by promoting informed decision-making by the community.
In 2007, the Reserve Bank Board reviewed the Bank’s communications arrangements. It decided that a statement would be issued after each Board meeting, outlining the reasons for the Board’s monetary policy decision, whether or not the cash rate target was to be changed. Previously, a statement of reasons was given only if the decision was to change the cash rate. The Board also decided that, consistent with best central banking practice, its decision would be announced at 2.30 pm on the day of the Board meeting, rather than, as previously, at 9.30 am the following morning. Finally, the minutes of the monetary policy meeting of the Board are now published two weeks after each meeting. These changes further enhance the Reserve Bank’s transparency and accountability.
Apart from these Board-related communications, the Reserve Bank has a longstanding and extensive program of communication.
The quarterly Statement on Monetary Policy informs the financial markets, media and wider community about the Reserve Bank’s thinking on monetary policy and provides a basis for the Parliamentary Committee’s questioning of the Bank. These statements provide an analysis of the state of the economy, the outlook for inflation and economic growth and further explanation of recent decisions on interest rates.
The Reserve Bank Bulletin is a monthly record of media releases, speeches, monetary policy minutes and a wide range of comprehensive statistics, plus articles on various topics, which in the past year included commodity prices, hedge funds, banks’ global bond funding, the kangaroo bond market and banking fees.
The Financial Stability Review, published in March and September each year, gives a detailed assessment of the overall condition of Australia’s financial system. As well, there is analysis and views on issues of specific interest; in the past year such issues included interest-only loans, owner-occupier housing debt and assets, international financial reporting standards and private equity in Australia.
Communication also takes the form of speeches. During 2007/08, the Governor, Deputy Governor and senior officers gave over 20 speeches on various topics, including the economic conjuncture and outlook; reform of the payments system; inflation; risk and the financial system; market operations; central bank communications; housing costs and liquidity; and the lender of last resort.
The Reserve Bank disseminates research conducted by the staff in the form of Research Discussion Papers (RDPs). While the views expressed in these papers are those of the authors and do not necessarily represent those of the Bank, their publication encourages discussion and comment on economic issues among a broad range of researchers. During 2007/08, nine RDPs were released on a range of topics, which included business and household behaviour, economic forecasting, the effects of monetary policy, and international trade and finance. Staff have also had their work accepted in various publications, such as the Journal of Monetary Economics, The Journal of Real Estate Research, The Australasian Journal of Regional Studies and Australian Economic Papers.
The Reserve Bank holds regular conferences, bringing together academics, central bankers and other economics practitioners from Australia and overseas. The 2008 conference was on ‘Lessons from the Financial Turmoil of 2007 and 2008’. A volume of the conference papers and discussions, the 20th in the series, will be published later in 2008. The Bank also issued a call for papers for a Research Workshop to be held later in the year, focusing on issues relating to monetary policy in open economies. This follows a similar Research Workshop held in December 2007, which featured 14 papers by academics and central bankers from Australia and overseas.
In November 2007, the Reserve Bank, in conjunction with the Melbourne Business School, held a conference as part of its review of reforms to Australia’s payments system. A volume of the papers and discussions was published in April 2008.
The Reserve Bank publishes information in both electronic and hardcopy formats. Demand for hardcopy publications has been declining as use of the website continues to grow strongly. In 2007/08, the number of page views/downloads of information on the website averaged about 60,000 per day, almost 50 per cent higher than in the previous year. The number of subscribers to the e-mail service for alerts about information published on the site totalled around 13,300 at the end of June 2008.
To assist the media’s reporting on key Reserve Bank publications, lock-ups are provided to give media representatives early access, under embargo, to the monetary policy minutes and the Financial Stability Review, as well as the Statement on Monetary Policy.