monetary policy
Monetary Policy Monetary policy involves action by the Reserve Bank of Australia (RBA), on behalf of the government, designed to influence the cost and supply of money and credit in an economy. ... The main objectives of monetary policy are to: stabilise the AUD, maintain full employment, promote sustainable economic growth and to maintain low inflation. ... Monetary policy is particularly suited to regulating inflation and has been reasonably successful in many advanced economies at maintaining low inflation, while retaining relatively low levels of unemployment. ... Monetary policy can be implemented to two different ways: Firstly, the RBA can try to control the money supply in the economy through its control over the money base (currency in the hands of the public and deposits from financial institutions with the RBA). This form of monetary policy implementation is known as monetary targeting. In the mid 1970s to the early 1980s monetary targeting was used, however it was highly unsuccessful and was abandoned in the 1980s as a result of its ineffectiveness. Secondly, the RBA can try to influence the general level of interest rates in the economy through setting a short-run rate like a cash rate, known as rate-setting monetary policy. This is the way in which monetary policy is implemented by the RBA in Australia currently. ... To ease monetary policy the RBA would buy second hand government securities from the banks and Non-Bank Financial Institutions (NBFIs).