Monetary Policy Presentation - Reserve Bank of Australia by hcj


									February 2013
Teacher and Student Guide

  Monetary Policy and Recent
  Economic Developments
Reserve Bank of Australia
Responsible for:
•Monetary policy
•Payments system stability & efficiency
•Financial system stability
•Issuing Australia’s currency notes
•Banker to the government
•Managing foreign exchange reserves
Reserve Bank Board
•Responsible for monetary and banking policy
•Nine members: Governor, Deputy Governor, Secretary to the Treasury,
and six external members
•Meets first Tuesday, except January
Objectives of Monetary Policy
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
How the RBA achieves its objectives
•   Inflation targeting regime since 1993, agreed with the government in
    1996, and updated in 2003, 2006, 2007 and 2010
•   Objective is to keep annual inflation between 2 and 3 per cent,
    on average, over the cycle
•   CPI inflation is the target, but underlying measures – which abstract
    from temporary large price increases and decreases – help show
    future trends in ‘headline’ inflation
How the RBA affects inflation
•   RBA sets the policy interest rate (termed the cash rate – the rate
    banks charge each other for overnight funds)
•   The RBA uses liquidity operations (altering the supply of overnight funds) to
    ensure the cash rate remains at target
•   Changes in the cash rate affect private mortgage and other lending and
    deposit rates that, along with any exchange rate response, affect the
    amount of 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
For more information
Visit the Reserve Bank website:
•   Chart Pack   (updated monthly)

•   Education
•   Statistics

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