Transcript of Question & Answer Session What's Up (and Down) With Households

[Bo Seo]

Hello Governor, this is Bo Seo from The Australian Financial Review. I just wanted to ask you two questions, if I might. The first is, on a global scale, I wondered whether you could talk us through the impact of the US Fed's decision to pause rates on the RBA's approach to Australia. And second, ahead of the Federal election, given some of your comments about public investment and spending, I wondered what you're mainly looking out for from a fiscal response and whether you could talk us through the impact of potential tax cuts or cash transfers on the way the RBA approaches its decisions.

Luci Ellis

Thanks very much for those two questions. In terms of what the Fed does, they're responding to US domestic conditions. That will have an influence on the global outlook and obviously, the global outlook is one input into the policy decision made by the Board, but it's not the only one. It is important, but it's not the only factor that the Board considers. As always, the Board will be making its assessment of Australian economic prospects in relation to what's happening in the Australian economy and the progress that we're making on the policy goals that we've been set, and we don't move in lockstep with other country's policy rates, and never have, at least while we've had a floating exchange rate, which is a long time now.

In terms of fiscal policy, I did call out that fiscal decisions matter both for how things are measured in the national accounts and also for the income available to households. It is a fact that public investment has been strong lately. It is also a fact that public consumption growth has been very strong for quite some time and part of that is because some things are now being delivered as public consumption rather than as direct transfers, although there's also an element of – health and education spending is generally classified as public consumption if it's undertaken by the governments. So again, this is just part of the environment in which the Board are making decisions so I wouldn't want to preview any particular fiscal policy decisions or plans by any particular party to that. It is what it is and that's part of the input into our decision making and what the staff recommend to the Board and what the Board then decide to do.

Thanks very much.