The primary source by which to assess Australia's compliance with this standard is a 1999 self-assessment of transparency practices carried out by the Australian Treasury department. The self-assessment was benchmarked against the underlying principles of what would shortly become the International Monetary Fund's (IMF) Code of Good Practices for Monetary Transparency. The Treasury report found Australia's monetary policy transparency practices to be generally consistent with the IMF's Code. However, it recognized that one deficiency had to do with Australia's reliance on convention rather than legislation to establish its accountability framework. Beginning with the 2004 IMF Article IV Consultation report and carrying forward in subsequent years, it has been reported that Australia's monetary policy framework is both transparent and effective. Based on the provisions of the Reserve Bank Act of 1959, the primary policy objective was to maintain currency stability, but beginning in 1993 that objective shifted to inflation targeting. The 2007 IMF Article IV Consultation notes that Australia's prudent monetary policy has resulted in relative strength even in the context of the U.S.-led credit crisis.

General Overview

In 1999 the Australian Treasury conducted a self-assessment of its transparency practices across a range of government functions, including monetary policy, against what was, at the time, the International Monetary Fund's (IMF) proposed Code of Good Practices regarding transparency. The Treasury judged that "Australia's monetary policy arrangements are generally consistent" (p. 11) with the principles at the heart of the IMF's proposed Code. The self-assessment did note a divergence from the Code, however. It stated that the accountability practices of the Australian Reserve Bank (ARB, Australia's central bank) were based on convention rather than specified in legislation. An IMF 1999 publication evaluated the Treasury's self-assessment as to its objectivity, and found it to be sufficiently objective in its judgments. Successive Article IV Consultations from 2004 to the present concur that Australia's monetary policy framework is both transparent and effective. The IMF expressed approval of Australia's inflation-targeting approach to monetary policy, and agreed that Australia's combination of exchange rate flexibility and well-developed risk management has contributed to the overall resilience of the economy.

In the Public Information Notice appended to the 2005 Article IV Consultation, the IMF noted that "Australia has implemented wide-ranging structural reforms and strengthened the frameworks for monetary and fiscal policies over the past two decades" (p. 1). A 2004 report by the Organization for Economic Cooperation and Development (OECD) held Australia up as a "model for other OECD countries," citing the "tenacity and thoroughness with which deep structural reforms were proposed, discussed, legislated, implemented, and followed up." The report also praised the emphasis upon transparency and accountability in Australia's fiscal and monetary frameworks, as well as its macro-policy orientation toward stability and resistance to permitting economic policy to be drawn into political disputes. The IMF's concluding statement to the 2008 Article IV consultations welcomed the publication of a statement explaining the RBA's interest rate decision immediately after every policy meeting, which is two weeks later followed by the release of detailed meeting minutes, as an improvement in the transparency of monetary policy decision making, which "should enhance public understanding of monetary policy decisions."

The 2007 IMF Article IV Consultation Report found Australia's macroeconomic and policy performance to be very strong, enabling a streamlined approach to the consultation discussions. The RBA has recently resorted to adjusting the official interest rate when inflationary pressures and other factors have warranted such action. The RBA governor has publicly vowed that monetary policy would be based on actual economic conditions, and would not succumb to political influence. The 2007 report states that "the RBA's general approach is to let market forces determine the exchange rate" (p. 6). The IMF noted that Australia's deep, open, and transparent financial markets contribute to the country's resilience in the face of potential external shocks. The concluding statement to the 2008 Article IV consultations, published in July 2008, acknowledged that inflation, higher than it has been in a decade, presents a significant challenge. Nonetheless, the existing inflation-targeting framework was deemed appropriate, and the consultations thought its benefits confirmed by the recent shocks to inflation. The consultations further thought that "despite the pickup in short-term inflation expectations, the absence to date of a notable acceleration in wage inflation demonstrates that the RBA's inflation target has helped to anchor medium-term inflation expectations." Lastly, the consultations accredited the flexible exchange rate with being helpful for monetary policy, as the appreciation in recent years has contained inflation.

Annex II of the 2007 IMF Consultations report took a look at Australia's statistical issues, noting that the country makes a great quantity of diverse financial and economic data available to the public. According to this statistical annex, an IMF statistical teem met with representatives of the RBA, the Australian Bureau of Statistics, and the Australian Prudential Regulation Authority "to encourage the reporting of monetary data using the standardized report forms (SRFs) introduced in October 2004. The SRFs provide for accounting data to be broken down by instrument, sector, and currency" (Annex II, p. 3).

The Principles

Clarity of roles, responsibilities and objectives of central banks.

FC

The primary source for information on Australia's compliance with this principle is the Australian Treasury's 1999 transparency self-assessment, which found that "Australia's monetary policy arrangements were generally consistent" with what was then the IMF's proposed Code of Good Practices on Monetary Policy. Successive IMF Article IV Consultations since 2004 have determined that Australia's monetary policy framework is both transparent and effective.

According to the RBA website, the primary responsibility of the Reserve Bank is the formulation and implementation of monetary policy, as well as communicating that policy to the public. Section 10(2) of the Reserve Bank Act of 1959 sets forth the RBA's obligations. Section 11 of the Act establishes the relationship between the RBA and the government. Section 17(1) of the Act specifies the criteria for eligibility for the office of Governor of the Reserve Bank Board, and the Act also lays out the procedures for nomination of the Governor and board members, the length of their terms, and the mandate of RBA independence. Originally, the primary goal of monetary policy was established as maintaining currency and price stability. Since 1993, the focus has shifted to inflation targeting, which has become the "centerpiece of monetary policy." The RBA website describes the relationship between the central bank and the government as "independence with consultation."

The RBA's 2007 Annual Report notes that The RBA Act of 1959 and the Commonwealth Authorities and Companies (CAC) Act of 1997 together set forth rules of conduct of RBA staff and officials. The RBA and CAC Acts also lay down the rules for compensation for board members and bank officials. The RBA Act also mandates the creation, roles, responsibilities, and rules of conduct that apply to the RBA's Audit Committee.

Open process for formulating and reporting monetary policy decisions.

FC

The primary source for information on Australia's compliance with this principle is the Australian Treasury's 1999 transparency self-assessment, which found that "Australia's monetary policy arrangements were generally consistent" with what was then the IMF's proposed Code of Good Practices on Monetary Policy. Successive IMF Article IV Consultations since 2004 have determined that Australia's monetary policy framework is both transparent and effective.

According to the RBA website, the primary responsibility of the Reserve Bank Board is the formulation of monetary policy, as laid out in the RBA Act of 1959 and further buttressed by the CAC Act of 1997. The Board's official schedule calls for 11 meetings per year, held on the first Tuesday of the month (there is no meeting in January). Every scheduled meeting calls for a detailed discussion of national and international economic issues and conditions affecting the domestic and international financial markets. Discussion includes the possibility of changes in interest rates. Any such changes are publicly announced on the day after the board meeting. The CAC Act also sets out the RBA's obligations for reporting and accountability. By law the RBA must produce an annual report plus the RBA's financial statements and an auditors' report. These materials must be submitted according to a set schedule to both the Treasury Department and Parliament. The Governor, Deputy Governor, and other senior RBA officials must report to Parliament every six months, by law, at which time the RBA issues its Semi-Annual Statement on Monetary Policy. The possibility of inflation and production growth are assessed in the RBA's publication titled The Economy and Financial Markets, which is issued in intervening quarters following the semi-annual monetary policy publication. Changes in monetary policy are announced via press releases which also contain the resultant new cash rate target, accompanied by the rationale behind the change.

Section 11 of the RBA Act requires that the RBA Board inform the government of its monetary and banking policy in periodic formal and informal meetings with the Treasurer. The Act also provides a resolution mechanism by which policy differences between the RBA and the government may be allayed. If the Treasurer and the RBA Board cannot achieve resolution of their differences on their own, the Board submits a formal statement to the Treasurer, who then makes a recommendation to the Governor General. The Governor General consults with the Federal Executive Council, and then presents his or her policy determination to the Treasurer. The Treasurer, in turn, communicates this determination to the Board, which is obliged to implement it. However, the success or failure of a policy adopted through this mechanism becomes the responsibility of the government. According to the RBA website, this procedure has yet to be used in Australia.

Public availability of information on monetary policy.

FC

The primary source for information on Australia's compliance with this principle is the Australian Treasury's 1999 transparency self-assessment, which found that "Australia's monetary policy arrangements were generally consistent" with what was then the IMF's proposed Code of Good Practices on Monetary Policy. Successive IMF Article IV Consultations since 2004 have determined that Australia's monetary policy framework is both transparent and effective.

The RBA website provides a wide array of publications on monetary policy, its underlying rationale, and the data upon which it is based. It issues a monthly Reserve Bank Bulletin and press releases. The Bulletin includes information on the RBA's foreign exchange transactions, consistent with the IMF's disclosure standards. When interventions are required, these are explained in the Semi-Annual Statement on the Conduct of Monetary Policy, and are the subject of press releases and speeches. The IMF Special Data Dissemination Standard (SDDS) website discloses that Australia also posts its monetary data on the SDDS bulletin board and that these are consistent with SDDS specifications for timeliness, periodicity, and coverage, although flexibility options regarding timeliness and periodicity are invoked in several data categories. The 1999 Treasury Department self-assessment notes that, as of March 1, 1999, Australia's monetary and other macroeconomic data achieved full SDDS compliance. As evident on the RBA website, other publicly available sources offer detailed advance notification of any policy changes and the reasons for them. In addition, the RBA publishes quarterly Statements on Monetary Policy and an Annual Report of the Reserve Bank. Twice yearly, the RBA Governor goes before the House Standing Committee on Economics, Finance, and Public Administration to answer questions on the formulation and conduct of monetary policy.

Accountability and assurances of integrity by the central bank.

FC

The primary source for information on Australia's compliance with this principle is the Australian Treasury's 1999 transparency self-assessment, which found that "Australia's monetary policy arrangements were generally consistent" with what was then the IMF's proposed Code of Good Practices on Monetary Policy. Successive IMF Article IV Consultations since 2004 have determined that Australia's monetary policy framework is both transparent and effective.

According to the RBA website, the RBA Board maintains a relationship of "independence with consultation" with the government, but its decisions regarding interest-rate policy are made without government involvement. As noted on the RBA website, "this principle of central bank independence in the operation of monetary policy, in pursuit of accepted goals, is the international norm. It prevents manipulation of interest rates for political ends, and keeps monetary policy focused on its long-term goals." The RBA website provides convenient public access to a variety of materials that explain the bank's monetary policy and its implementation. Direct access to statistical and statistical reports is available through the website. In addition, the RBA provides detailed public announcements regarding any policy change, including its underlying rationale. The RBA produces quarterly Statements on Monetary Policy in which interested readers can find not only an in-depth analysis of the financial markets and the overall economy, but also a reasoned statement for the current policy stance. The Governor fulfills legally mandated accountability requirements by appearing before Parliament at least twice a year to explain monetary policy issues to the House Standing Committee on Economics, Finance, and Public Administration. The RBA Governor also maintains a close relationship with the Secretary to the Treasury regarding issues of joint Treasury and central bank interest. Together the RBA Governor and the Treasurer deliver to Congress a Statement on the Conduct of Monetary Policy. The CAC Act of 1997 requires the RBA to produce an Annual Report, financial statements, and an auditors report for submission to the Treasurer and placed before Parliament.

The RBA website also offers access to a variety of other economic reports, the texts of public addresses by the Governor or members of the RBA Board, press releases, statistical presentations, and explanatory materials. The RBA's accountability and reporting obligations are outlined in the CAC Act, which also contains provisions regarding the conduct of RBA officers and Board members. In addition, the CAC Act created the Office of Auditor General, which performs independent audits of the annual reports of all government agencies, including the RBA.