Philip Lowe: The labour market and spare capacity

Address by Mr Philip Lowe, Governor of the Reserve Bank of Australia, to a Committee for Economic Development of Australia (CEDA) Event, Adelaide, 20 June 2019.

Central bank speech  | 
28 June 2019

I would like to thank CEDA for the invitation to address this lunch. It is a great pleasure to be back in Adelaide and to participate in another CEDA event.

Those of you who follow the RBA closely would have noticed frequent references to the labour market in our recent communication. Today, I would like to explain why this is so and also discuss how we assess the amount of spare capacity in the labour market. I will then finish with some comments on monetary policy.

The Broad Policy Framework

Students of central bank history would be aware that the Reserve Bank Act was passed by the Australian Parliament in 1959 - 60 years ago. In terms of monetary policy, the Parliament set three broad objectives for the Reserve Bank Board. It required the Board to set monetary policy so as to best contribute to:

  1. The stability of the currency
  2. The maintenance of full employment
  3. The economic prosperity and welfare of the people of Australia