Senate Economics Legislation Committee, , 46:56 to 1:32:05
The committee reviews productivity growth assumptions and the broader economic outlook for Australia.
Topics: Agricultural productivity, Workplace relations, Parliamentary privilege
Speakers: Michele Bullock, Hon Matthew Canavan, Andrew Bragg, Dave Sharma, Hon Jane Hume, Deborah O'Neill, Dr Christopher Kent, Lisa Darmanin
>> Thanks Jack. Good morning Miss B and Dr. Kent. I had some questions about the table on page four of your recent statement on monetary policy. The February statement on monetary policy,
>> page four.
>> Yeah, I believe it's the o overview >> Yep. Um, so as I understand it, based on your latest forecasts, even with an additional one to two rate increases because they're priced in, um, you don't quite get back to the midpoint of the target band for inflation within the 2 and 1/2 year horizon. >> That's correct.
>> That's that's what that says. Yes. Cuz 2.5 is the
>> is the mid point of the target. Yep. And I'm reading this right. So that you've got the cash rate going to alo 4.2 2 at the end of the forecast period is currently 3.85. So that's a 35 basis point increase. So that's technical
assumption. Yes.
>> Yes. Okay. But even so if you assume that interest the cash rate goes up, we still don't get back to the midpoint of the
>> that's what the central forecast says.
>> Okay. All right. Thank you. Uh and then on the GDP forecasts, so I noticed um that there's been a significant downgrade of those at least if you get beyond the middle of this year, you know, down to 1.6%.
>> There's been an upgrade in the near term and then a downgrade in the out year, which reflects the higher interest rate profile and the higher exchange rate.
>> Okay. Is that I mean I did read this somewhere so I just wanted to check but is 1.6 six. I mean, is that the the slowest growth at the end of a forecasting horizon that the RBA's
produced? >> It's it's actually um I don't believe it is. I think um our November 22 forecast had a lower growth rate uh than that.
>> Okay. But it's pretty low outside of recession.
>> It's pretty it's pretty low outside of a recession.
>> And so you you touched on this earlier, but what what were the drivers in your forecasting framework that have driven that downgrade? you mentioned
>> the two the two things that have changed between the November forecasts and here the main things that are driving this different profile are the stronger near-term because as I said we were surprised on the upside on a few things um but the higher cash rate path and the higher exchange rate because you know the higher exchange rate also puts or tightens things up um puts downward pressure on inflation and and the economy um those two things are helping to drive um the uh growth rate back down again below the rate of growth of supply because again as I said earlier we've got a situation we've got excess demand and that's what helps to close the gap and bring inflation back down into the into the band.
But um just to my lay person's understanding, I mean we've got the economy growing say in December 2027 at 1.6% but inflation trimmed to mean inflation still outside the target band. So that suggests to me that the speed limit in the economy now is below 2%. The economy can't grow
>> well that's sort of our productivity assumptions for the short term for the next just for the period we forecast. Yes, productivity is only growing by about.7 I think in our forecast which means that um yes the supply side of the economy is probably only growing by about two and that's part of the challenge um unless we can improve productivity we're going to find it hard to grow much more than 2% a year without um having inflationary issues.
>> Okay, right. So unless we can get productivity above 0.7% which is your long run
>> we need we need it's not our long run forecast it's our short run we only forecast it for the it's not really a forecast it's an assumption
>> okay
>> based on um what we've been observing in terms of >> actual productivity outcomes plus quite frankly the inflation the unit labor
>> So unless we can get productivity moving higher though the growth rate is likely to stay.
>> Product productivity um is all about producing more with the same amount of good the same amount of labor and capital and that's what raises living standards.
>> Yes.
>> So if you can't get productivity increasing more quickly then you can't grow the economy and you can't raise living standards as quickly.
difference historically in the productivity performance between the public sector and the private sector,
>> Uh yes, but there are I I I think um not only the public and the private sector, but different sectors of the economy, there's actually massive differences in productivity.
>> Yes.
>> In levels and in growth rates.
>> Okay. Understood.
>> And in the ability to measure it
>> and and that was the other point.
>> Okay. Well, I was I guess I was just truth in the statement or in in the view that because the lower productivity parts of the economy have been growing more quickly, lower productivity sectors uh than the more productive parts and that's predominantly public sector versus private sector. Our overall productivity performance has declined.
Um so our analysis actually s doesn't suggest that that is the main part of what's going on. There is some impact of that. There is a measurement issue as uh Chris was referring to in that um for many parts of particularly um the service the non-market service area. So I'm thinking about things like um health care and uh age care and those sorts of things where we have seen growth in those areas. um outputs are measured by inputs. So by definition there is no productivity growth over time. >> It can't account for quality. It can't so so by definition you just don't get any productivity growth. Um but it's it's fair to so our analysis suggests that um there's a little bit of that but that's not the main game. And you only have to look overseas to see similar declines in productivity over time. The US is an exception. most other countries over the decades productivity growth has slowed. Um and you know we're we're no different. We we had it's true that we have not had any productivity growth um over the last probably 10 years. Productivity level is probably about where it was precoid. >> Um and um it's had lots of big wiggles in the middle. I discourage people from looking at quarterly changes in productivity. you've got to think about it in a slightly more long run sense. But it is concerning that it hasn't grown since precoid. Um and as I said earlier, it's really important that we get productivity growth um in all areas of the economy if we can. Um but uh as I said, our analysis suggests that this market non-market thing you're referring to, that's not the main gain.
>> Okay. Thank you. Just the United States. to raise that. So the fact that they've or continue to have a better productivity performance means their economy is able to grow more quickly without triggering inflation which is what we've seen now over the last 3 to four years.
>> Uh yes, although they've had an inflation problem too and they still have an inflation problem.
>> Yes.
>> Um so uh yes they have had uh strong productivity growth. Um and they're the standout I think aren't they Chris?
>> Very >> amongst advanced economies.
>> you've got two minutes, Senator.
>> Okay, sorry. Last question. So, um, just going back to the inflation the model, the page four table there. So, as I said, we've got the the assumption is that the cash rate goes up by 35 45 basis points, but inflation trimmed mean inflation still remains above the midpoint of the target. Mhm. is it fair to say that we will need additional rate rises to bring trimmed mean inflation back to the midpoint of the target everything else being equal?
>> So that's the central forecast. Um what it actually means um that's not clear. It might but it might not. I would refer you to um graph 3.6 six of the statement which is on page 53 which gives you a fan chart which shows you historical errors of forecasts. So the board in its approach is not saying that this is this is the right path it's going to take.
>> Yes,
>> it's cautious and as we saw back you know middle of last year we thought inflation was coming back into the band and it hasn't. So forecasts are don't read that the interest rate path we've got in there is the interest rate path we have to have. >> It might be, but it might not be. >> And hence why the boards say that they are going to be continually looking at Tells us where we are and what that means for our forecast going forward. And we will be continually reassessing that. If we need to go up further because inflation is entrenched, the board will do so because that is its primary mandate.
>> Yeah. Okay. Now, look, I understand these are forecasts, but I mean, as I read table four, the outlook is for growth below 2%, inflation above the midpoint of the target band, higher interest rate rises, and declining real wages out to the middle of 2028. It's
not it's uh not a nice picture, but I do want to inject one positive thing here, and that is the labor market. I think everyone's been focusing on the negatives, but we're in this position because the economy is actually doing okay. It can't grow really strongly because productivity is not growing, but the labor market is holding up. It's still a little bit tight, and this is good news. And in fact, it's much better news than some other countries overseas have seen with their labor markets.
>> Thank you. Thank you, Jen.
>> Thank you. Um, Senator Bragg.
>> Look, thanks very much, Governor, for being here today. So, in terms of housing policy, I imagine it's still your view that supply is the key thing.
>> It's it's the interaction of supply and demand, which is the key thing to do with housing.
>> Getting the numbers up.
Well, we have a shortage of housing. So, and and this isn't something that's just occurred overnight. >> It's been decades in the making.
>> It it is instructive though to look at the numbers on dwelling completions. If you go back a decade ago, uh middle of last decade, we were getting 220,000 in some years. Um I think an average of about 200,000 a year. Now we're back to 170,000 houses a year. So this year I think looks like about that number. Um so it does appear that we are heading in the wrong direction in terms of the supply. Um so I guess if if supplying is the most important thing and we're heading in the wrong direction, what do you think should happen?
>> Well, again I'm not the housing policy person. That is for governments. But my only reflection on that >> is that the governments seem to be right making the right noises in terms of looking at ways of um freeing up the ability to >> um make it easier for developments and high density I think is an important part of this. Um certainly when I talk to when the bank talks to um companies building companies in liaison they say >> um the process of getting a high density development approved is very very challenging particularly in New South Wales. I know the New South Wales government are looking at that. Um so governments need to look at those
issues. It's I think the turn of phrase you use is very uh revealing because you just said that the government seem to be making the right noises. I would agree.
>> Well, I I'm sorry. I'd go further than that. I'd say I think in the New South Wales government's uh uh case, they are actually making moves.
>> Yeah. Unfortunately though, they're 44% behind on their housing target.
>> It's again, it's not for me. This is not
>> Yeah, exactly.
>> Can I also add one other thing?
>> Thanks for that.
>> And that is coming out of um
>> feeling. >> Sorry, I was just reflecting on the other very immature comments.
>> Let's keep let's keep the Q&A. >> Sorry, Governor. I was going to say coming out of co um it has the the construction industry housing construction has been quite constrained and it's been constrained in a couple of ways. Um one is um we often hear trades >> you just can't get trades. >> Yeah. Um and also what we hear from our leaison and and this is easing somewhat but certainly in in the year or so coming out of co the time taken to finish actually strung out because you couldn't get these trades. So there was a there was a big backlog. They couldn't finish them. They couldn't get the trades to finish them. So there's >> issues about development but there's also issues about how do you actually get them built?
>> Yeah. So, I think you're right. Governments, all governments of all colors are making the right noises. Uh, in the case of the federal government, the government's own statement is that they're spending $45 billion on housing. That's one of their main talking points, but clearly we are not getting the numbers up. So, I mean, is is the solution here to spend more money? I mean, what else could what else could the federal government do [clears throat] to get the numbers up?
>> Senator, I am not a housing policy person. I cannot decide what I think the government should do on these matters. Okay. It is not a problem.
>> Fair enough. Let's let's just stick to your your figures then. if I look at the statement of monetary policy projections on dwelling investment. >> So if I look at your November 25 dwelling dwelling investment projections, you had it going from 4.8% 8% growth in December 25 through to 2.5% growth in December 27.
>> This is the November statement, February statement.
>> November,
>> the November statement.
>> November. Then when we go to the February statement, we go from 5.5% growth in December 25 down to [clears throat] ne negative 0.4 in June 28. M >> so and then if I plot those two uh statement of monetary policy dwelling investment forecasts the change between November last year and February this year like looks to be quite pronounced to me. So, you're now projecting over the medium-term, I assume you imagine that is the medium-term, um negative growth.
>> The our [clears throat] I think our um forecasts for a dwelling investment um a view that it is difficult to get um uh get construction going in that area. I'm not familiar with the specifics of the of the forecasts. I'd have to take on notice exactly >> how we've come to those numbers but Chris
>> but I think it's a feature of the updated forecast with a interest rate path that's higher >> under the assumptions
>> that's part
>> dwelling investment is a key transmission mechanism for monetary policy so it is natural for dwelling investment growth to come down
>> I I [clears throat] guess the concern I have is that if governments are focusing on housing and the labor per government here in CRA is spending 45 billion on housing, but we're getting negative growth projected. That's not good, is
>> It's not solving a a a supply problem, but again, these are our forecasts >> based on what we think is is going to happen based on a central projection of an interest rate rise.
>> Well, very very concerning. Well, thank you. We look forward to your uh detailed answers on notice on that. I just wanted to ask you if you don't mind, chief, if I continue to one other topic of housing.
>> You've you've got three more minutes.
>> Well, I'm always striving to be efficient and productive.
>> Yeah, that's great.
>> I know that's also how the bank feels about things. So, um, in terms of the 5% deposit scheme, um, I mean, you I get that you're not the lending regulator. That's appper's appa's role but you do look at risk credential risks aren't you in the
>> we look at macro credential risks and financial stability risks broadly not in terms of individual institutions
>> this is probably a very dumb question but I know you have to feel lots of dumb questions in your role when you come to CRA so you're probably used to this but um but but but do you have like do you have a loan to value ratio in your RBA policy book instructive about what a risky loan might be.
>> We don't we don't have a sort of a policy book. I mean the usual um uh rule of thumb is that anything over 80
>> 80 yeah
>> is um is a bit risky. Um and there is some evidence that those loans at loan evaluation ratios over 80 are more risky than loans at lower loan devaluation ratios. But it all depends on the context and and um at the moment um and this is risk to the banks I should say. I'm not I'm not um I'm talking about the potential impacts on the banks at the moment. negative equity because of the rise in house prices, negative equity is practically there's hardly anyone in negative equity. So risk to the banks even at high loan valuation ratio is quite low because if someone couldn't meet their repayments and heaven forbid awful situation had to sell they would they would not be selling at a loss. So and they certainly wouldn't be selling >> um at uh at a rate that wouldn't give them the money needed to repay the bank. So in terms of the risk to the financial institutions even that if you were over 80 it wouldn't necessarily be a massive risk to the institution at the moment but 80 is the number probably
>> but what about for the person I mean I guess I'm 95% loan is a risky loan isn't
>> What's the default rate on those?
your questions next. Are you do you want to ask me any questions?
>> You're constructing a fantasy here.
>> This is sorry it's not a fantasy. 95% loans is a policy of your government.
You've had evidence here about the low
>> Just allow Senator Greg to finish his line question.
>> Thanks, Senator H. I appreciate that.
>> please keep going.
>> Well, I mean, my question is, is a 95% loan a risky loan?
>> It may or may not be. It all depends. Um, >> fair enough. there's a there's 80% above if a loan devaluation rate of a over 80% typically not if you're a first home buyer now but typically you would have to get lenders mortgage insurance to address that. That's because the banks regard them as a as a riskier loan. So the higher the loan to valuation ratio then yes it's it's potentially riskier but it depends in whose hands that loan is and it also depends on um what I said is happening with the housing market and in the case the risk to the banks >> might be different in different circumstances
>> but it is a bigger loan by definition isn't it
>> it's a bigger loan by definition um if if if you are just s taking as given the um the size of the loan loan then yes it's riskier >> potentially if you've borrowed 95% of it rather than 80% of it.
>> So basically a interest rate rise would have a greater disproportionate impact on someone with a 95% loan.
>> Well if you've borrowed more money >> then yes you will be paying higher interest rate on a on a larger loan. Yes.
>> Yeah. Just finally because I know others have questions. I just um I mean again I understand your role may preclude you from answering this but I mean when you look at the house prices for the at the entry level for younger people um do I mean do you think that they're too high?
>> Well [laughter] too high that's a that's a really sort of judge judgment. I I wouldn't like to um say they're too high, but um it is harder for people um housing prices to income now are higher than they've been in the past. So, by definition, it is harder for people to get in on the bottom end of the rung of the ladder uh than it has been in the past given an income.
>> Thanks, Governor. Thanks, Chief.
>> Thank you, Senator.
>> Thank you, chair. Um I just wanted to go to the statement on monetary policy and particularly uh the table at the back of it the real wage price index. My reading of your forecast here is that uh um even by while there is some growth in real wages by the end of the forecast period uh real wages will remain below where they are today uh through to mid 2028.
little bit careful just using the wage price index for that because the wage price index doesn't actually measure what people are being paid because it [clears throat] doesn't ex include things like job changes, promotions, bonuses, those sorts of things. So, um, if you actually look at real wages,
>> that's the best measure we've got. >> But over that forecast period, they'll still be below, won't they?
>> But I'm not sure it's the best measure
we have. What's the best measure you
>> And the national accounts measure is a much broader measure that you don't
forecast that >> and those and those numbers um >> I think they're still rising.
>> That's what the nominal average earnings per hour.
>> That's nominal, not real, is it?
>> Yeah, but the wage price index is nominal as well. So you have to just you have to
>> hang on. How can the real wage price index be nominal if it's called a real wage index?
>> No, the the one here is the nominal wage price index growth.
>> Yeah. under on that table under income wage price index. That's the nominal wage price index.
>> All right, I'm getting confused. Is it is it is it a real is it real? Is it after inflation? I suppose that's >> it's not
>> that
>> that's not a real not a measure of real wages then >> cuz I suppose colloially when we say
wages sorry no he's looking at this one. >> The one you should be looking at is real average earnings per hour.
>> Right.
>> Right. Which is rising
>> which does start rising. But the real wage index actually
>> yes but that doesn't as I said measure what people actually earn.
>> Well uh has there been a period where I mean we that that is now back to that index is now back to 2011 levels.
>> Well I think
>> has can I just finish my very defensive on this point. I mean has there ever been a period in Australian economic history where we haven't had an increase in the real wage index for 17 years. >> In fact it will still be quite a lot.
>> Take that on notice. Do we have graphs >> I'd have to try find it.
>> I'm just trying to wonder. So, real wages are back to 2011 levels today. I've gone back 15 years and governor, you said before the economy is okay. I'm just trying to square your statement that the economy is okay with how the feedback I get as a representative of people that they're really struggling. So when you say the economy is okay, are you not not taking into account how much people are struggling right now with the way living stands have dropped by something we've never seen before?
>> On the on the contrary, um we do understand that not everyone is doing well. >> Well, I would put it's not not everyone,
it's almost everyone is not doing well.
Well, >> if you go to um uh it's not it's um graph 2.7, which is household disposable income growth. And what that shows you is that over the past um couple of years, um real household disposable incomes have been
>> right? Are they
>> That's what that that's what that tells
you. where are they back to levels they were before co
>> um if you look at the Aena measure of real income per hour worked
well >> above well this is I mean part of the problem you keep jumping around to different stats I just asked is real disposable incomes back to where it was before
>> co our preferred measure yes they're above >> this one
>> I believe it would be but we'd have to take that on notice can can I just make a broad point well can I can I just make an important point here.
>> It seems to me whenever there's something that might be negative, you take on notice and then you when you try and jump to a different measure when you want to say positive. I suppose people listening this might be get pretty frustrated because certainly people don't feel like they're better off right
now. >> But can I answer your question about these different measures? >> The wage price index currently in real terms is not much higher than it was in 2010. >> That's not good on that measure.
>> That's right. And that's
>> I would agree with you there.
>> That's that's okay. Good. So, and then
>> the real measure of average earnings from the national accounts which is not disposable income because it doesn't take out taxes and so on >> has increased over that period. >> The increase though is relatively modest which is a reflection of what we talked >> on productivity.
>> Yeah. Look, and thank you for that because it would be I think people are only going to get angrier in this country if they're gas lit into thinking that the economy is okay when when their lived experience is absolutely terrible.
>> Senator, I take exception to that comment.
>> I am not as I have taken gas.
>> I I have said that there are certain aspects of the economy which are doing well and one of them is the labor market which is positive for people. Now, I understand that some people are doing it tough. I do understand. I get letters and I read them. But that is not to say that you can't recognize that there are some parts of the economy that are doing well and the labor market I think has been a really positive thing for this country.
>> Well, I'm only s my my response governor was to the comment that the economy is okay. You didn't say that some people are doing well. You said the economy is okay. And I cannot see on these numbers if the econ what is the economy about the economy is about in my view the reason we care about it is for people's [snorts] basic ability to provide for themselves and that has gone backwards at a rate that we have never seen in Australian economic history
>> and I am saying that you're thinking okay means it's great okay means it's okay we aren't grow I've already made this point we are not growing strongly we can't grow strongly because we don't have strong productivity growth. That is not a good thing. But people at least have jobs at the moment. There is the unemployment rate is at typically uh historic not historic low levels but um at pretty low levels and that is a positive thing.
>> But if the local market was so good, why aren't wages growing?
>> Well, wages it depends again on your on your measure, right? You you are looking at wage price index. We are looking at a measure of what people are actually being paid now. It's not shooting the lights out either, but it is above where it was preco.
>> So I don't know if people think the labor market is that great either cuz again I would have thought the Labour party and the Labor government would think that would want a good labor market to be one where people's living standards are increasing when their wages are going up and they haven't been under this government. They've fallen. They're behind. >> Got to have a job. >> They've gone backwards. They've gone backwards. >> Got to have a job >> and that's just a fact. >> You'll get your Senator. So um uh just um uh is the is the is the government's budget in structural
>> Um I'm not the best person to answer
>> does the RBA evaluate the structural position of the
>> We take others others we take uh treasuries and others um uh measures of
>> Do you factor in the structural settings of the budget to the to monetary policy decisions?
>> We put public demand into our forecasts for what demand is going to be aggregate demand and we factor that into our forecast for inflation.
>> Well, okay. I I'll just Treasury does provide an estimate of it in chart 3.13 from my EFO on page 88 I thought. Yep. 88. Um the structural deficit here it's off a graph so I can only estimate it but it would appear to be in the order of around 1 and a half negative 1/2% actually increasing this financial year. Is that does that accord with the inputs that the RBA would use to its decision?
>> We would use we would use we would use those inputs. structural budget deficit, >> we would use those inputs.
>> So a structural deficit would indicate that fiscal policy is expansionary at the moment.
>> It depends on the direction it's going
>> but it's increasing on this graph.
>> If you've got I think so that means it's expansionary. >> I think we've got a graph in the um statement of monetary policy that shows if you go on the forecasts um what happens is that it it uh it's expansionary and then it starts to
>> so it is expansionary at the moment.
It's it's the yes it's it's rising. So therefore the change
>> so an expansionary fiscal policy would put upward pressure on interest rates or other things being equal.
>> Expansionary we've we've been in this before. If if um if public demand is increasing then it's increasing demand total and
>> I know why you don't want to go. But problem is because you you get very defensive and then I thought you're independent. I thought you're independent. So So these are very simple things. So yes, we've established there's a structural deficit. We've established that's increasing. We've established that's expansionary. >> Expansionary fiscal policy >> puts upward pressure on interest rates, does it not?
>> Depends on what happens with private demand.
right citus pus. Uh so so if private demand if private demand stays the same and expansionary fiscal policy will push upward with pressure interest rates.
>> That's she's an economist mathematically correct. >> Yes. Thank you. [laughter] >> Are in a situation of excess demand and you add more demand doesn't matter where it comes from. >> Just put pressure on inflation.
>> Thank you. We've got there. So thank I just um um limited time left. Has the Reserve Bank increased its estimate of
Um we our models uh estimates of Nairu have been rising a bit. Okay. >> But we don't take a model approach only. We also we also use a bit of judgment and we've got some information in the new um the most recent statement on monetary policy which talks about our approach to thinking about the tightness of the labor market.
>> So what what's your current estimate of the narrow?
>> Our current estimate 3.6 I think.
>> Yeah. And have you lowered potential growth? Can I just ask one quickly? Have
you >> 4.6? Sorry, apologies.
>> Okay. Sorry. Have you lowered potential growth uh uh forecasts?
>> Our potential growth we think um is a little bit lower than it was. We thought it was probably middle of last year.
>> Okay. All right. I have lots of more questions, but I'm not much time. So,
>> thank you, Senator Kim. Five minutes.
>> Thank you, Chair. I just want to follow up on some of the changes that have occurred since the review, the RBA review, and how that has been implemented. Obviously, now with two boards, can you talk to the committee about how that is working and um uh the responsibilities and the obligations of each of those boards and how that's
>> three boards?
>> Three boards, sorry, I should say.
>> Monetary policy board, the payment system board, and the new governance board, which has been in place for about Um the way that's working um I think it's working quite well. It means that um the operations of the bank um are now basically overseen by the governance board and that there's a big focus on risk um on um uh and a large chunk of that um people may not realize but we have a very very big technology component of our business. So there's a lot of focus on that of the governance board. the governance board um is also focusing on things like uh the building uh project that we're doing. Um so all of those sort of operational aspects um they're focusing on the monetary policy board now doesn't have to focus on some of those additional things. So it is focusing very much on uh monetary policy, monetary policy strategy. It's also focusing much more on financial stability which um it hasn't done so much in the past. Um so that's and the payment system boards sort of bit stand alone. Um but um the thing is that um the boards do need to work together a bit in the sense that um the it's the responsibility of the governance board to basically make sure that the policy areas of the bank are resourced enough to well resourced and well supported to do their their jobs. Um so that's a focus of theirs. Um one thing that is a little bit different um is that the balance sheet um they are sort of responsible for the balance sheet in one way and the risks on the balance sheet but on the other hand the balance sheet of a central bank is often used for policy purposes and so there is um um anou an agreement on how that sort of if policy if we didn't need to use the balance sheet policy purposes how would we sort of um communicate that leers with the governance board on that keep them aware of it but the bottom line is that decisions on using the balance sheet for monetary policy are in the hands of the monetary policy board not the governance board but I'd say it's working very well and we're getting a lot of good support from the board members on the governance board
>> that's that's very encouraging I mean obviously so much of the focus I think revolves around the decisions that the monetary policy board makes there was last year a new statement on the conduct of monetary policy and a statement of expectations that was launched by the treasurer in July I think it was um and it set down uh um the following that um following the RBA review um that it required all board members to carry out regular public engagements such as speeches. Now I've seen a couple of the speeches obviously that you've given and that's um some of the other board members have given but I'm wondering if you could give us an update on the progress towards that whether it's monitored is it encouraged is it enforced do you you know get to the end of a sort of a quarter or half year and say oh goodness me you know so and so you haven't done your requisite amount of speeches yet what what do you do? So
the um we have put out a um a sort of a framework for how the board members will engage in public uh discussion. >> Um they might make a speech, they might make a speech but it might be a different sort of public engagement. So there is something uh on the website I believe which sets out how that will work and our communications team are working with the board members to see how they're going to fulfill um their obligations there. I think it's one a year that that that some might do a speech, other might others might um do a panel. There's not there's there's a range of ways in which they can fulfill this requirement to do public engagement.
>> What's the difference between an expectation? Sorry, an expectation and a KPI for a board member on something like
>> Um well, I mean, they've got to do they've got to do one >> public engagement. Um and we'll make sure they do the one public engagement.
>> Okay. Thank you. Thank you, Chair.
>> Senator O'Neil, >> thank you very much. You've got five minutes. >> Thank you. Just the rationale for the public engagement. Um what what is the underlying principle that has led to this establishment of this new process
>> of the public engagement of the board members? Um look, I I think it's come from the um one of the reviewers on the panel. um was from overseas central banks and overseas central banks do have um public speeches made by members of their decision-making boards. Um so I understand where it came from but its application here is different because in those overseas countries typically the people on those boards are they're professional economists. They are sometimes um uh full-time members of the bank's staff. So, they they're different sorts of board members than the sorts of board members we've got. We've got part-time members, some of which have some economics training, some of which might just have general business. So, um I think you can't just So, it came from this idea that other countries do it. >> Yeah. You can't transplant that model here. And that's what we've tried to do. We've tried to give the spirit of the recommendation, recognize the spirit of the recommendation, but recognize that we have a different system and we've got to make it work within our system.
>> And the more um accessible your board members are, the more they move around in the community, the better their insights are that they bring to the board. You've described the work of the monetary board in response to Senator Hume's questions. Um, and we've had some discussions about productivity. Do you believe the new structures is making the monetary board more productive and effective?
>> Um, I think the new structure is I think it's giving them more time to consider and I think if you ask them this question I hope they'd agree. >> Um, they now have more time to consider the decision. They have more time for discussion and debate. Um, and let me tell you there is debate. Um so I think it's making it more productive in that sense in that they are actually much more engaged with the decision that you'll know that the statement we put out after the uh meeting that is now a statement of the board. Used to be a statement by the governor. It is now a statement of the board and it gives them much more time to make sure that they're happy with the statement that it reflects their views. Um so um that's um I think it is making them more
to hear that it's significant structural reform and I think it's good to hear that it's improving the productivity for you guys. Um there's been some discussion today about real wages. If I can go back to the June quarter of 2022. Uh you may or may not have documents in front of you with regard to that. But my uh my understanding from the documents available is that real wages were actually going backwards by 3.5% at that point of time which was when the Albani Labor government was first elected. Can you compare that to the employment and wage growth that is a characteristic um since we've come to government which and I understand that is the longest run of continuous wage annual wage growth in the in a decade.
>> Um I mean I can only look at the graph that Chris has got open in front of us. the the which is you know
>> I think real wage growth's a good thing. Matt, perhaps you have a different view.
>> Um the governor answered your question.
Um the the the issue is that um there's been a lot of volatility in real wage growth. Real wage growth um was very strong uh through co when there was a lot of support. Um you remember a lot of government support. >> Yes. Um but what happened after that when inflation rose up that was when real wages start so the so the big the big um decline in real wages that we saw was related to the massive increase in inflation that was that was what drove that but it's been very very volatile. So if you sort of take out that period in the middle um they've been steadily steadily increasing over the past
>> I think um the other concept is disposable income. I didn't have it before, but real per capita disposable income. It has risen, but it's risen very modestly >> in recent years and over the past decade
>> and the
>> and that reflects very low growth
>> and unemployment as well. >> Sorry. the intersection between that and unemployment, the unemployment rates.
>> Um well um the lower the tighter the labor market and the lower the unemployment rate in theory then the potentially greater um upward pressure on nominal wages. So that helps um keep um pressure if you like on on nominal wages. if you and and that's sort of um part of the reason we still think the labor market's a little bit tight because growth in in nominal wages is coming off but you know it's it's still running at 3 point something% >> well
10:30 we need to let you go but I just
wanted to do one follow-up question I was just after asking you the question about the monetary policy board members and their obligation to carry out regular public engagements. Do you have a list of the public engagements that each of the board members have?
>> I don't believe we have that list at the moment. I I know that we have something on the website which sets out the uh the way we're going to do it and then it's up to the members to liers with us and lies particularly with our communications team on how they're going to fulfill that.
>> Thank you. If you're on if on notice, I would really appreciate it if you could get back to us with a list of the board members and the public engagements they've done on behalf of the monetary policy board because obviously a lot of these people have quite public profiles generally. They might be public speaking have a public engagement on something else but they really need to do it with their monetary policy board.
>> So you want a list of ones they've done, not a list of ones they're planning to
>> Ideally, yes. Thank you. So far, yes, in the last 6 months, more than six months,
nine months. I think the answer might be none at in the last 6 months, but I will I will take that on notice.
>> Okay. So, that statement from the treasurer was in July last year. So, leaving living it a bit tight. You're going to have a lot of statements on monetary policy engagements in the last
>> Again, again, it depends on it's not necessarily a speech. It's it's it's an engagement of some and there's a series of things they can do.
>> Okay. Well, if a list would be terrific. Thank you. Thank you, Governor. Thank
>> Okay. Thank you very much. We will um let you go now um and suspend for a short break and resume at 10:45. Thank you everyone.