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Reserve Bank Objectives

Economics (Year 12) - Economic Policy Objectives

Christian Bien

What are the economic objectives, under the Reserve Bank Act 1959?

Under the Reserve Bank Act 1959, the RBA has the three economic objectives:

  • Stability of the Currency

  • Maintenance of Full Employment

  • Ensuring the economic prosperity of the welfare of the people of the Australia

Interpretation of the RBA Objectives

Stability of the Currency

The stability of the Currency does not mean fixing the exchange rate. Stability of the currency refers to ensuring prices are stable and the people have confidence in the currency. For example, the RBA should not print too much money as this would result in hyperinflation and distrust of the currency, likewise what was seen in Zimbabwe.

Maintenance of Full Employment

Ensuring the cash rate adjusts to ensure the unemployment is near natural levels, somewhere near 5%.

Ensuring the Economic Prosperity of the Welfare of the People of Australia

This one is the more open-ended one. Usually, it means ensuring a sustainable rate of economic growth that expands the real incomes for Australians in the long term. Ensuring economic prosperity can also mean protecting the economy from any potential recessions (such as a potential housing bubble). Economic prosperity also means ensuring that the economy remains internationally competitive and the labour force remains productive.

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