Governor of the Reserve Bank of Australia (RBA) Philip Lowe will appear today before the House of Representatives standing committee on economics to face questioning over the use of its monetary policy tools in response to the economic fallout from the COVID-19 crisis.
The public hearing, which will be held via teleconference later this morning (14 August), will focus on the central bank’s decision to set a 0.25 per cent target for the cash rate and the yield on three-year government bonds.
Governor Lowe previously stated that the “accommodative approach will be maintained as long as it is required”, stressing that the central bank would “not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2-3 per cent target band”.
The central bank also stated that a move to negative interest rates would be “extraordinarily unlikely”, with governor Lowe unconvinced of its utility.
The parliamentary committee also made note of the central bank’s claim that the down “is not as severe as earlier expected” and that a recovery “is now underway in most of Australia”, which it said would be “uneven and bumpy”, given the COVID outbreak in Victoria.
Following the announcement, Liberal MP and committee chair Tim Wilson, commented: “We are interested in learning more about the RBA’s plans to support a strong recovery for the Australian economy.
“There’s never been a more lively time to discuss monetary policy, with reckless proposals for Modern Monetary Theory floated in the media.
“This hearing will provide a good opportunity for the RBA to outline the shortcomings of such proposals.”
This comes just a week after both the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Committee (ASIC) were scrutinised over their response to the pandemic.
The hearing formed part of the committee’s reviews of the 2019 APRA Annual Report and 2019 ASIC Annual Report.
The regulators were also questioned over the ongoing execution of their primary responsibilities, particularly ASIC’s oversight of the self-managed super fund industry.