Chapter 12 – Internet Exercises The Reserve Bank of Australia: www.rba.gov.au Australia’s Central Bank, the Reserve Bank of Australia (RBA) hosts one of the most useful and easily accessed websites in the nation. The RBA’s conduct of monetary policy is highly transparent and the website plays an important role in contributing to this transparency. The Bank’s monetary policy tools are clearly explained on the website. In common with other Central Banks, the RBA identifies a major interest rate over which it has control and through this influences interest rates throughout the economy. Changes in interest rates then impact on interest sensitive spending, which in turn influences aggregate demand and real GDP. The interest rate targeted by the RBA is the cash-rate, the interest the Bank charges the financial institutions on short term funds. Under the Reserve Bank Act of 1959, the RBA is tasked with contributing to full-employment, economic stability, and the general well-being of the Australian people. In recent years, the Bank has determined it can best achieve these aims by providing price stability. To this end, it has identified a target inflation band of two to three percent. The financial sector, and indeed the public as a whole, is aware that if inflation nears the upper or lower limits of this range, the RBA is likely to act to bring the economy into balance. In other words, the Bank will act to change interest rates. The manner in which this decision is made is very open. The Board of the RBA meets on the first Tuesday of the month for eleven months of the year (with the exception of January). On the following morning, the Bank announces any policy changes arising from this meeting to the press and on the website. The reasons for the decision are also published on the website. TALKING IT OVER AND THINKING IT THROUGH 1. Give some examples of the data available on the RBA website. 2. In November 2006, the RBA decided to increase interest rates. What factors informed this decision? 3. Click on the Recruitment tab, second from the bottom in the left hand column, and look at the RBAs graduate recruitment program. Suggested Answers: 1. Click the “Statistics” tab and find a range of financial and other data – for example, data on credit card debt, unemployment in most nations around the globe, and so on. 2. Click on the “Monetary Policy” tab in the left-hand column of the webpage. The second heading on this page is “Statements on Monetary Policy”. You can click on this tab, and then on the statement for November 2006. Reasons for the November 2006 decision included tight labour market conditions, strong global economic growth and high levels of borrowing amongst Australian consumers. 3. This is an individual question to which an individual response can be developed.