Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser reviewed evidence that public trust in the bank has held up despite declining confidence in its ability to meet its objectives, delivering the Sir Leslie Melville Lecture at the Australian National University. Trust in the bank’s strategy can reduce the interest rate increases and output losses needed to bring inflation back to target. The speech outlined research initiatives and communication priorities intended to support policy decisions and explain how the bank responds to changing economic conditions. About 55% of respondents to the Community Research Survey reported high or moderately high trust in the RBA, with overall trust broadly stable or slightly higher over the preceding 18 months. Confidence in the bank’s ability to meet its objectives over the previous and following year fell materially, while ratings for transparency and decision processes improved. Longer term inflation expectations derived from financial markets and economists’ forecasts remained anchored to the 2% to 3% target. However, business survey respondents became less certain that the target would be achieved over the next five to 10 years. The RBA is launching an external engagement program with researchers and establishing a financial markets research and modelling hub. It is also extending its economic models and increasingly testing alternative scenarios alongside its central forecast. Communication priorities include explaining why inflation is away from target, the trade-offs involved in returning it to target and how policy would respond as circumstances change. This means explaining the bank’s policy strategy rather than promising a future interest rate path. Targeted communications for households and businesses combine detailed publications with shorter summaries and explainers.

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