RBA talks measures with House of Representatives
(27 August 2012 – Australia) At a meeting on Friday morning Reserve Bank of Australia (RBA) governor Glenn Stevens ruled out the prospect of printing more money to stimulate the local economy until the official interest rate was close to zero.
He told the House of Representatives economic committee the central bank would follow the US in using quantitative easing to stimulate the local economy, while it was still able to cut interest rates.
'I hope never being in a position of having to use quantitative measures,' he told House of Representatives economic committee.
'I don't think we'd be undertaking quantitative measures in an attempt to ease monetary policy until we'd used the interest rate mechanism because I think that it is still the most effective one.
'You wouldn't do that until such time as the process of easing interest rates got to a lower bound.'
Stevens also said the RBA would be hesitant to increase its foreign exchange reserves in order to bring down the value of the Australian dollar.
While he was there he again reiterated high profits among Australian banks were not excessive.
Stevens said people should not be surprised that Australian banks were doing better than others around the world.
‘‘There’s not a high bar to clear there,’’ he said. ‘‘It’s indicative of lack of competition that profits are so high.’’
Banks’ growing focus on deposits as part of their funding was a factor that people often overlooked, Stevens said.
‘‘People want to look at this through the prism of mortgage finance, but there are other things going on as well,’’ he said.
‘‘It’s fair to look at the provision of mortgages, but people shouldn’t be neglecting the other side of banks’ balance sheet, where most of the funding comes from.’’
'I hope never being in a position of having to use quantitative measures,' he told House of Representatives economic committee.
'I don't think we'd be undertaking quantitative measures in an attempt to ease monetary policy until we'd used the interest rate mechanism because I think that it is still the most effective one.
'You wouldn't do that until such time as the process of easing interest rates got to a lower bound.'
Stevens also said the RBA would be hesitant to increase its foreign exchange reserves in order to bring down the value of the Australian dollar.
While he was there he again reiterated high profits among Australian banks were not excessive.
Stevens said people should not be surprised that Australian banks were doing better than others around the world.
‘‘There’s not a high bar to clear there,’’ he said. ‘‘It’s indicative of lack of competition that profits are so high.’’
Banks’ growing focus on deposits as part of their funding was a factor that people often overlooked, Stevens said.
‘‘People want to look at this through the prism of mortgage finance, but there are other things going on as well,’’ he said.
‘‘It’s fair to look at the provision of mortgages, but people shouldn’t be neglecting the other side of banks’ balance sheet, where most of the funding comes from.’’
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