What economic objectives are the Reserve Bank of Australia required to pursue in its conduct of monetary policy and what relative importance is placed on these objectives?
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Question

Quizplus · Accepted Answer

The Answer is Under the Reserve Bank Act (1959), the objectives of the central bank are full employment, stability of the currency and the prosperity and welfare of the Australian people. Since the early 1990s, the primary objective has been the stability of the currency; in other words, achieving low levels of inflation. In the short run, this may require a degree of trade off of the other objectives. Increases in inflation are controlled by tightening of monetary policy, which tends in the short-term to reduce the rate of economic growth and raise unemployment. However, it is believed that achieving the objective of low inflation will in the long run allow the other objectives of economic prosperity and low unemployment to be fulfilled. The target set for the inflation rate since the 1993 has been an average over the business cycle of 2%-3% inflation and since its adoption, this policy of inflation targeting has been very successful in achieving low inflation alongside strong economic growth.

What Economic Objectives Are the Reserve Bank of Australia Required