Received

The Reserve Bank boss has apologised to Australians who listened to controversial forecasts during the pandemic and took out mortgages based on expectations interest rates wouldn't budge until 2024.

RBA Governor Philip Lowe said he was sorry households acted on the forward guidance, noting the bank should have chosen different language to communicate the conditions attached to the predictions.

"I'm sorry that people listened to what we've said and acted on that and now find themselves in a position they don't want to be in," Dr Lowe told a Senate committee on Monday.

"We didn't communicate the caveats clearly enough ... they didn't hear the conditionality and that was partly our fault."

Surging inflation prompted the bank to start lifting interest rates in May.

But Dr Lowe said the country was in a dire situation when the forward guidance was issued, with 15 per cent unemployment predicted as COVID-19 ravaged the economy.

"We wanted to do everything we could, we had a strong insurance mindset," he said.

He said the massive injection of stimulus to bolster demand had successfully kept the economy afloat but in hindsight admitted the insurance policy was a touch heavy-handed.

Inflation started rising faster than expected, he said, and the continuous COVID-19 waves were hard to predict, with the bank concerned the Omicron wave would spark more lockdowns like the Delta wave.

"If we had known Omicron wasn't going to be like Delta, we would have considered a different path," he said.

While Dr Lowe said wage growth of six to seven per cent would make its job of taming inflation harder, he dismissed accusations he did not want to see real wage growth for workers.

He reiterated the preferred wage growth anchor point of 3.5 per cent and, based on current projections for inflation and wages, expects to see real wages growing by 2024.

Productivity was flagged as an essential element of real wages growth, with Australia aligned with the global trend of fairly modest productivity growth of around one per cent.

"Growth in real wages and profits comes down to doing things better," he said.

The governor also weighed in on the independent review of the central bank, with experts considering the merits of having two separate boards - one that sets interest rates and another that deals with the day-to-day operations of the central bank.

Dr Lowe said the existing board structure had worked well but the dual board model was also effective in other countries.

Under the Reserve Bank Act, the board is responsible for monetary policy and the governor is responsible for the central bank's operations.

While Dr Lowe did not have a strong view either way, he said the nation would have to wear the "transition costs" of altering the leadership structure of the central bank.

Transition costs would include new laws and communicating the merits of the new model to the public.

"What I know is both models work fine, but to get from one to the other can be problematic," he said.

However, he told a Senate inquiry if the government decided to draft the Reserve Bank Act today, it would unlikely put a governor in charge of operations with no mention of how the board oversees the governor's performance.

"That wouldn't meet the current standards of corporate governance," he said.

© AAP 2022

Australian workplaces will be required by law to have protections against sexual harassment and ensure gender equality after parliament agreed to reforms.

From next year, employers will need to take reasonable steps to end sexual discrimination and harassment in their workplace and achieve gender equality.

National Sex Discrimination Commissioner Kate Jenkins - whose landmark Respect@Work report recommended the reforms - said the laws would "fundamentally change" how people are protected from workplace sexual harassment.

"It changes our settings from being reactive to also being proactive, so that employers are required to take meaningful action to prevent harassment from occurring," she said.

"It shifts the emphasis from a complaints-based model to one where employers must take action, and continuously assess and evaluate whether they are meeting the requirements of the duty."

Prime Minister Anthony Albanese said the laws represented a new chapter in Australia's national story.

"The last two years have been a real reckoning in this country. Australian women have stood up ... and courageously and emphatically declared: enough is enough," Mr Albanese said.

"We are a great country but there's an even greater Australia within our reach, if we only dare to extend ourselves a little."

The laws will take effect in late-2023 to give employers time to adjust their practices.

But Ms Jenkins urged workplaces to start implementing changes sooner rather than later.

A website launched by the commission earlier this month provides information and training for workplaces to help meet their new obligations.

"These important reforms are timely and should be considered by state and territory governments to achieve greater harmonisation of sexual harassment legislation as part of any upcoming legislative reviews," Ms Jenkins said.

© AAP 2022

The Reserve Bank boss has apologised to Australians who listened to controversial forward guidance issued during the pandemic and took out mortgages based on expectations that interest rates wouldn't budge until 2024.

RBA Governor Philip Lowe said he was sorry households acted on the forward guidance, noting that the bank should have chosen different language to communicate the conditions attached to the predictions.

"I'm sorry that people listened to what we've said and acted on that, and now find themselves in a position they don't want to be in," Dr Lowe told a Senate committee on Monday.

"We didn't communicate the caveats clearly enough ... they didn't hear the conditionality, and that was partly our fault."

Surging inflation prompted the bank to start lifting interest rates in May this year.

But Dr Lowe said the country was in a dire situation when the forward guidance was issued, with 15 per cent unemployment predicted as COVID-19 ravaged the economy.

"We wanted to do everything we could, we had a strong insurance mindset," he said.

He said the massive injection of stimulus to bolster demand had successfully kept the economy afloat but in hindsight admitted the insurance policy was a touch heavy-handed.

By way of explanation, he said inflation started rising faster than expected and that the continuous COVID-19 waves were hard to predict, with the bank concerned the Omicron wave would spark more lockdowns like the Delta wave.

"If we had known Omicron wasn't going to be like Delta, we would have considered a different path," he said.

While Dr Lowe said wage growth in the order of six to seven per cent would make its job of taming inflation harder, he dismissed accusations he did not want to see real wage growth for workers.

He reiterated the preferred wage growth anchor point of 3.5 per cent, and based on current projections for inflation and wages, expects to see real wages growing by 2024.

Productivity was also raised as an essential element of real wages growth, with Australia aligned with the global trend of fairly modest productivity growth of around one per cent.

"Growth in real wages and profits comes down to doing things better," he said.

Dr Lowe said there was no shortage of ideas to boost productivity, but that many of these ideas were politically challenging to implement.

But he had two reasons to be optimistic productivity could pick back up - the clean energy transition, and advances in technology.

"Once we make this energy transition, that will open tremendous opportunities," he said.

"And there's been tremendous advancement in the tools of science and information technology and data processing, and over time, better information technology and science will deliver stronger productivity."

On inflation, Dr Lowe called for action to boost power and housing supply.

The Albanese government has all but committed to implementing some kind of price cap mechanism to keep energy costs contained, but Dr Lowe declined to weigh in on the preferred mechanisms to bolster the supply of gas and electricity in the market.

The head of the RBA also pointed to rents as a key contributor to the consumer price index, noting that a boost in migration was colliding with fairly modest increases in housing supply.

© AAP 2022