Guy Debelle: Monetary policy during Covid

Text of the Shann Memorial Lecture by Mr Guy Debelle, Deputy Governor of the Reserve Bank of Australia, online, 6 May 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you for the opportunity to speak to you tonight.

I am honoured to be giving the Shann lecture. Edward Shann's work had a lasting impact on Australian economic thought. As an economic historian, Shann looked to the past to inform solutions to the most important problems of his time, including how to lift Australia out of the Great Depression. Many of Shann's key contributions seem orthodox today but were well ahead of his time. Shann advocated for the removal of tariffs, a shift away from centralised wage fixing and a move to a more flexible exchange rate. Shann also saw an important role for an independent central bank to prevent and respond to crises. He was widely regarded as an excellent teacher, who left a significant impact on his students. One such student was HC 'Nugget' Coombs, the Reserve Bank's first Governor. Coombs described Shann as 'supremely capable of communicating the excitement of intellectual exploration - and establishing the sense of social responsibility, which should guide those who work in academic fields'.

Taking inspiration from Shann, tonight I will talk to you about the role the Reserve Bank has played in responding to the current crisis. I will describe what the Reserve Bank has done over the past year to support the economy through the COVID pandemic. I will talk about why we have taken these actions and some of the thinking behind the policy decisions. Then I will look at the outcomes of these policy actions to date. Finally, I will highlight some of the issues the Bank will be thinking about in the period ahead. 

Policy actions during COVID

The Reserve Bank of Australia (RBA) has taken a number of complementary policy actions to support the Australian economy since the onset of COVID. The RBA has lowered its policy interest rate to near zero, set a target for the 3-year government bond yield, enhanced its forward guidance, commenced a program of purchasing government bonds and provided long-term low-cost funding to the banking system. I will explain each of these actions in more detail shortly.