It is a great pleasure to be here again in Melbourne addressing CEDA’s Annual Dinner. This is the fifth time I have done so, and it is like returning to be with old friends. I usually talk about some aspect of monetary policy, and will do so again tonight, starting with something very familiar and then moving to newer territory.
When we look back to fifteen or twenty years ago, the thing about monetary policy that stands out is the lack of clarity about what it was expected to achieve. That is, what should be its ultimate objective, and therefore what should it be accountable for? This lack of clarity applied both inside the Reserve Bank and outside it. I am sure some of you are familiar with the wide variety of objectives for monetary policy that were put forward at the time. As well as the familiar aims of low inflation, low unemployment and good economic growth, there were those who felt it should also be aimed at improving the balance of payments, promoting investment or limiting the growth of credit or some other monetary aggregate. Others put forward the view that it should aim to rein in the growth of asset prices.