Glenn Stevens: The RBA 'delivered on its mandate through difficult times'

U.S. Federal Reserve chair Janet Yellen (L) meets Glenn Stevens. Photo: Jason Reed/Pool/Getty Images

Glenn Stevens just delivered his final speech as governor of the Reserve Bank of Australia, and, as usual, it hasn’t disappointed — at least for economics fans out there.

In a wide-ranging discussion on the Australian and global economy, he spoke on a variety of topics including the limits of monetary policy, the challenges facing fiscal policy as well as inflation targeting.

While plenty will be made of the speech, particularly on fiscal policy, there was one thing that immediately caught my eye, and not because it featured at the start of his address: his track record as governor.

For all the criticism he’s received since taking the job in September 2006, the Australian economy’s track record under his tenure is second-to-none.

Yes, there were other factors that helped Australia, but he and the RBA board were also heavily involved.

Just think of the events we’ve seen over the past decade. The global financial crisis, the European debt crisis and the trials and tribulations of the Chinese economy, something that we, in Australia, are more exposed to than most.

Despite all those headwinds, and more, Australia’s economy continued to grow with inflation and unemployment at levels the envy of many other advanced nations.

Stevens, rightly, defended his legacy.

We faced a more volatile world than the one of the ‘great stability’ of the previous period. It was a world characterised by massive swings in our terms of trade, and a very serious international financial crisis followed by a deep global recession, not to mention the effects of the adoption of ‘non-conventional’ policies in the major jurisdictions. And yet the Australian economy avoided a major downturn and turned in a performance on economic activity characterised by no more, and on some metrics slightly less, volatility. We have achieved the inflation target and with an average unemployment rate of between 5 and 6 per cent.

Had anyone, a decade ago, accurately forecast all the international events and simultaneously predicted that things would turn out the way they have in Australia, who would have believed? But here we are.

Under the guidance of the Board, the Bank has delivered on its mandate through difficult times.

While there was a lot of luck along the way, none less than the massive stimulus package implemented by Chinese policymakers in the wake of the GFC — something that almost certainly saved Australia from falling into recession — it’s clear that monetary policy, along with past financial reforms, all contributed to Australia’s economic resilience in what was a difficult period for the global economy.

On that score it’s hard to fault Stevens’ performance given the circumstances, policy framework the RBA operates under and tools at his disposable.

Despite this, it’s unlikely that his track record will please everyone. Australia is a tough crowd to please, with central bank bashing second only to political bashing when it comes to out favourite pastimes.

As governor, it’s largely a thankless job, albeit a high paying one. There’s often plenty of criticism and usually not much praise.

I’m sure incoming RBA governor Philip Lowe has already been briefed on what to expect. He takes the reigns from mid-September.

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