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Returning inflation to target is the RBA’s key focus in 22–23

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The Reserve Bank has outlined six strategic focus areas in its latest corporate plan.

With the consumer price index sitting at its highest level in decades, the Reserve Bank (RBA) has made returning inflation to target its top priority for the year ahead.

Six strategic focus areas were outlined by the RBA in its corporate plan for 2022–23, but returning inflation to a target range of 2 to 3 per cent was highlighted as key.

This comes as a significant shift from the central bank’s focus in 2021–22, which was supporting the Australian economy in the wake of the pandemic. 


But, the RBA explained, the global economy’s strong recovery post COVID-19 has shifted priorities, especially since high inflation has clouded the outlook universally. 

“In line with the global experience, inflation in Australia has increased significantly and unexpectedly. Global factors, including COVID-19-related disruptions to supply chains and the war in Ukraine, have accounted for much of this increase in inflation. 

“But domestic factors have also played a role, with the east coast floods, capacity constraints in some sectors, strong demand and the tight labour market contributing to the upward pressure on prices.”

The annual rate of inflation reached 6.1 per cent in the June quarter and is set to peak at around 7.75 per cent by the end of 2022, according to forecasts from both the RBA and Treasury.

The RBA expects inflation to ease back and fall within the upper half of the target range by the end of 2024.

“Achieving the inflation target preserves the value of money and facilitates strong and sustainable growth in the economy over the longer term,” it said.

“This helps businesses and households make sound investment decisions, underpins the creation of jobs and protects the savings of Australians. Sustaining high employment means not only do more people have jobs, but they also have better opportunities in life. High rates of unemployment are costly for the economy and hurt our society.”

So far, the RBA has announced four consecutive interest rate rises, including three hikes of 50 basis points (bps), leaving the cash rate currently at 1.85 per cent.

Economists have forecast that another 50-bp hike will be announced at the RBA’s September meeting, with some predicting rates could climb above 3 per cent by the end of the year.

As previously stated by governor Philip Lowe, the RBA is seeking to bring down inflation while keeping the economy on an even keel. 

“The Reserve Bank Board will seek to ensure that monetary policy is set appropriately to produce consumer price inflation outcomes in Australia that are consistent with the inflation target and to foster sustainable economic growth,” it said.

Other strategic focus areas

Another important focus area for the RBA is supporting the evolution of payments, which encapsulates its research into central bank digital currencies (CBDC).

“A well-functioning economy needs an effective payments system, and the landscape in this area is evolving rapidly. Additional major changes could be in prospect if new forms of digital money, such as CBDC and stablecoins, are adopted,” it said.

“The trend towards greater use of electronic payment methods presents both opportunities and risks. Policy issues for the Reserve Bank include the importance of keeping the costs of electronic payments low while maintaining the security, resilience and innovation in the payments system, and responding to any competition or access issues that emerge.”

The remaining strategic focus areas for the RBA are people, technology resilience, data management and communication effectiveness, which it said are intended to strengthen its capability to successfully deliver on its mission and key objectives.

These key objectives include price stability and full employment; the stability of the financial system; a secure, stable and efficient payment system; the delivery of efficient and effective banking services to the government; and the provision of secure and reliable banknotes.

The RBA also acknowledged that its monetary policy framework is currently being considered as part of an independent review, which will provide recommendations to the government by March 2023, and further stated that it will review its strategic focus areas in light of this review.

“We will actively support the review of the Reserve Bank by providing information and analysis to the panel and the secretariat, and by participating in the review’s activities. We have seconded four staff to the review’s secretariat,” the central bank added.

Returning inflation to target is the RBA’s key focus in 22–23

The Reserve Bank has outlined six strategic focus areas in its latest corporate plan.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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