Ian McFarlane replaced Mr Fraser as Reserve Bank governor on September 18, when the latter's seven-year term expired. Mr McFarlane had been deputy governor of the Reserve Bank since 1992. Prior to that, he held other positions at the bank and had also worked for the OECD. Mr McFarlane is known for his strong commitment to low inflation.
--and an explicit inflation target
The appointment of Mr McFarlane to the governor's position coincided with the release of a Statement on the Conduct of Monetary Policy. The statement, which was agreed between the federal treasurer and the governor, emphasises that the Reserve Bank alone determines short-term interest rate movements. It also commits the government and the Reserve Bank to holding underlying inflation to an average of 2-3% over the economic cycle.
The emphasis on the independence of the Reserve Bank was primarily to reassure international investors, who had been rather sceptical of the bank's independence, particularly since the former prime minister Paul Keating claimed that he had it in his pocket.