(9 March 2012 – Australia) The Reserve Bank of Australia insisted that monetary policy would continue to play a fundamental role despite moves by the big four to raise interest rates independently.Addressing delegates at a forum hosted by the Australian Industry Group, Dr Lowe said the structural changes were causing both significant problems and opportunities for businesses.
The Australian dollar’s lengthy period above parity is seen by the RBA as a positive in forcing change.
Lowe said if unemployment were to rise ‘persistently’, it would be a sign the strong dollar was becoming a negative. He said the RBA would ‘have the flexibility to respond’.
Lowe said the banks’ interest rate calls last month were not a major concern.
‘The key question for us is, if the banks move independently of the Reserve Bank, whether that undermines the transmission mechanism of monetary policy,’ he said. ‘I think the answer to that is, it does not.’