Reserve Bank of Australia (RBA) deputy governor Andrew Hauser says it is crucial that central banks forecast inflation and economic growth as it is necessary for policy-making.
He warned, however, that publishing interest rate expectations could lead people to overlook the conditional nature of such predictions.
Speaking at a luncheon in Sydney on Tuesday, Hauser explained that the primary role of central banks was to explain how they perceived the economy and how they would react if specific events unfolded. He pointed out the influence that RBA guidance had on traders, reflecting the importance of central bank communication.
RBA waiting for outlook to improve
"Inflation is deeply unfair," Hauser said, noting the significant impact it had on households, which was often overshadowed by the effects of rising interest rates.
He attributed the primary inflationary pressures to global factors but did not comment on concerns around the role of oligopoly power in Australia’s supermarket and aviation industries.
Hauser said that while inflationary pressures remained there were larger issues impacting Australia's economic outlook, including government spending, China’s economic activity, housing costs and consumer spending.
He explained that these elements, along with current employment levels, continued to drive the nation's economy.
Economy tied to China and global factors
According to Hauser, China's economic activity and housing costs remain key drivers of the Australian economy.
However, he warned that risks stemming from the Middle East and fluctuating oil prices were also significant concerns for Australia. "They matter to us because we’re an open country," he explained.
RBA not yet done lowering inflation
While the RBA is focused on addressing inflation, Hauser stressed that there was more work ahead. "It’s a big job, and we’re not done yet," he stated.
He also highlighted the importance of considering climate change risks as part of the bank's broader mandate.
RBA reform proposals a 'good idea'
Hauser expressed support for ongoing RBA reform proposals, particularly changes to the bank's board, though he noted that these reforms were ultimately decisions for the government.
"The bank has a really important job in setting interest rates," he added.