Australia tried a variety of frameworks – exchange rate fix, monetary targets and ad hoc discretion – before eventually homing in on inflation targeting, initially informal and then formal from 1997, and relatively flexible.
| Years | Targets and attainment | Classification |
| 1974-76 | currency fixed to USD then to basket, central bank sets middle rate with very narrow margins permitted; monetary policy instruments include interest rates, direct and indirect controls on bank lending and special reserve deposit ratio; efforts to increase non-monetary financing of budget deficits | augmented exchange rate fix AERF |
| 1977-83 | exchange rate devalued November 1976, then exchange rate adjusted little and often, until large devaluation March 1983; monetary ‘projections’ or ‘expected growth’, first given in March 1976, not regarded as ‘targets’, but met or nearly met 5 years out of 7; main monetary policy instrument now is OMOs | loose monetary targeting LMT |
| 1984-92 | exchange rate floated and most exchange controls abolished late 1983; wider financial reform helps move towards indirect monetary instruments; monetary target well overshot 1984 and not renewed; ad hoc policy and ‘checklist’ approach, with gradual shift towards more emphasis on inflation | loosely structured discretion LSD |
| 1993-96 | informal inflation targets for underlying inflation over unclear period, targets met | loose inflation targeting LIT |
| 1997-2023 | formal inflation targets (now endorsed by government, with central bank independent), initially for underlying inflation but from 1998 for headline CPI, on average, over the cycle; inflation target numbers exceeded between mid-2000 and mid-2001 and inflation expectations rise, but actual and expected inflation rapidly revert and formal target refers to cycle; smaller and shorter-lived rise in actual and expected inflation mid-2008, inflation target numbers met or near-met in other years; housing market cycles, largely addressed by macroprudential policies; 2020-21 Covid-19, strong fiscal response but also some temporary UMP, inflation volatile but expectations remain broadly anchored; 2022-23 world economic deterioration (Ukraine war) leads to sharp but limited rise in actual and short-term expected inflation while medium term expectations remain anchored; December 2023 government-central bank statement on monetary policy is a bit more explicit about employment (as well as price stability) objective | full inflation targeting FIT |
Selected IMF references: RED 1978 pp48-9, 64; SR 1978 pp8, 9; RED 1979 pp24, 30; RED 1981 pp35-7; RED 1983 pp52-6, 69-70; RED 1986 pp51-5, 57-8, 68; RED 1991 pp36-7, 38; SR 1995 p16; RED 1996 pp22-3; RED 1997 pp22-3; SR 2000 pp8-9; SR 2001 pp14-16, 28-8; SR 2002 pp6-7; SR 2003 pp5, 8, 27; SR 2008, pp5, 13; SR 2017 p50; SR 2021 pp7-8 10-11; SR January 2023 pp6-7, 15-17, 27, 36; SR December 2023 pp7-8, 17-19, 70-1.
Additional sources: Grenville (1997); MacFarlane (1997); Treasurer and Reserve Bank of Australia (2023).
Download the complete set of advanced country details.
Monetary Policy Frameworks 