(Australian Associated Press)
The federal treasurer has no plans to push for a lower inflation target band under the monetary policy agreement between the government and the nation’s central bank.
Josh Frydenberg on Tuesday ruled out changes to the official framework, which sets out key objectives including a flexible inflation target of between two and three per cent on average over the medium term.
The target, which has been unchanged since the 1990s, has consistently undershot in recent years, prompting calls for the Reserve Bank of Australia to consider lowering it.
Mr Frydenberg said monetary policy stability was key during the current global economic uncertainty.
The current inflation band had “served Australia well, helping to underpin our record 28 consecutive years of economic growth,” Mr Frydenberg said.
“Following careful consideration … I have concluded that the existing statement is consistent with the government’s and the RBA’s shared understanding of our monetary policy framework.
“Not changing the statement provides continuity and consistency at this time of global economic uncertainty.
“Domestic and global markets can be reassured that Australia remains a stable and predictable place to invest.”
As well, he said “inflation is expected to return to the band” over the medium term.
Labor’s shadow treasurer Jim Chalmers said monetary policy agreements were normally inked two months after elections, but Mr Frydenberg was “so hopeless it’s taken him six months to do nothing”.
“The main issue here is the economy’s floundering and the government has let the Reserve Bank do all of the heavy lifting when it comes to turning it around,” Dr Chalmers said.
He said recent income tax cuts didn’t boost the economy the way the government hoped, pointing to ’90s recession-era level retail spending and record household debt.
The Statement on the Conduct of Monetary Policy agreed between the central bank and the government was established in 1996 and has been updated six times since then.
It sets out the objectives of monetary policy, the mechanisms for ensuring transparency and accountability in the way policy is conducted and the independence of the Reserve Bank.