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.
|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|
|1997-2014||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 in other years||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.
Additional sources: Grenville (1997); MacFarlane (1997).
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