RBA Official Cash Rate Forecasting

RBA Official Cash Rate Forecasting

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RBA Official Cash Rate Forecasting

Type: Report
Learning Objectives Assessed: 1, 4, 5, 7, 8, 9
Weight: 15%
Task Description: 


The Board of the Reserve Bank of Australia (RBA) holds regular meetings, typically on the first Tuesday of every month, to decide the stance of monetary policy. The official cash rate or discount rate could be adjusted after such a meeting. After each meeting, the RBA will first make a brief statement (Monetary Policy Media Release) summarising the Board’s decision on the official cash rate. A much more detailed statement (Statement on Monetary Policy) will be released later. The Statement on Monetary Policy provides a lot of information about how the Board reached its decision.


Students are required to make a forecast of the official cash rate following the Board meeting. Students are required to explain their forecast in a statement something in between the Monetary Policy Media Release and the Statement on Monetary Policy (i.e. longer than the former but shorter than the latter).

It is important to show both evidence (e.g. statistical figures) and judgment (e.g. what that figure means to growth or inflation for Australia).

The first chapter of RBA’s Statement on Monetary Policy does not provide all the statistical evidence as they are contained in subsequent chapters. Students are expected to provide those figures either in the text or in the footnotes.

While the statement is on the domestic monetary policy decision, international economic and political factors can play an important role. As former RBA Governor Ian Macfarlane pointed out, Australia has never had a home-grown recession in that “we’ve never had a problem yet while the world economy has been growing.”


Samples from a previous year will be put on the course website. These samples all received a fairly good mark.


  1. The assignment must be typed.
  2. If the official cash rate before the meeting was 5% and you expect the Board to increase it by 0.25%, then your submitted answer should be “5.25%,” rather than “+0.25%.”
  3. The writing style should be similar to that of the RBA’s Monetary Policy Media Release. (Just imagine yourself as the RBA official who wrote it!)
  4. Font: 12 pt Times New Roman for the main text, 10pt for footnotes; single spacing; 2cm top and bottom margins; 2cm side margins.
  5. It has to be within two A4 pages(one-sided), including the footnotes.
  6. Referencethe information sources, particularly figures, in the footnotes.

Common Mistakes

Some common mistakes that led to a lower mark are:

  • Used and drew inferences from not up-to-date statistics. In particular, publications like World Economic Outlook and OECD Economic Outlook took a lot more time to prepare than official figures from the Australian Bureau of Statistics, and could, therefore, be outdated at the time of release.
  • Overly relying on a few non-credible reference sources, such as newspapers. Together with the last point, it means that there could be a trade-off between being up-to-dateand having credibility. The challenge here is to extract useful information from different sources and to integrate them together.
  • Focusing on the past events and forgetting that the setting of monetary policy by the RBA is forward looking.
  • Making too strong inferences from observed facts. E.g. “The terrorist attack in Middle East is likely to slow down the global economy.”
  • Citing a lot of figures but without pointing out their implicationsto inflation or growth.
  • Over-emphasising the latest change of a particular economic variable, instead of analysing it in perspective. For example, “April witnessed a slump in consumer confidence.” instead of “Consumer confidence has dropped in April, but was still substantially above the three-year average.”
  • Focusing on a few things only and therefore lack of comprehensivenessin the analysis.
  • Putting too much faith in newspaper analyses and market forecasts (on various things, not just interest rates). Remember, journalists look for eye-catching headings and tend to exaggeratethe implications of selective statistics.
  • Inappropriate referencing formats, such as not indicating the article titles or not indicating what points they referred to.
  • Inconsistencybetween individual statements or between the analysis and the conclusion. E.g. some students had cited a lot of factors in support of rising inflation pressure but at the end concluded that there was no need to raise the interest rate.
  • Student cut and pasted statements/sentences from various sources instead of writing in their own words. Consequently, those “Frankenstein statements” did not read smoothly and did not provide a coherent view of what was going on.

Warning: Cutting and pasting materials from any source is an act of plagiarism; if proven, it could result in a zero mark.

Examples of Data Sources

  • Central banks: RBA, European Central Bank (Monthly Bulletin), FRB, Bank of Japan
  • Australian Bureau of Statistics
  • World Economic Outlook.IMF and World Bank
  • Economic Updates. Queensland Treasury Corporation
  • Mid-Year Economic and Fiscal Outlook.Australian Government, the Treasury
  • Research Report by commercial and investment banks
  • Mass Media, e.g. Economists, Australian Financial Review, Business Week, Wall Street Journal, BBC, Reuters, Financial Times, Associated Press etc.
  • The newspaper Australian Financial Reviewregularly reports the forecasts of market economists on monetary policy changes, especially in the lead up to a Board meeting. However, one should note that market economists (as well as academics) make wrong forecasts all the time!
  • Previous Monetary Policy Media Releasecan be found on the RBA website
  • Previous Statements on Monetary Policyon monetary policy can be found on the RBA website
  • Minutes of the RBA Board Meeting can be found on the RBA website


Late submission: Since students should prepare the assignment at least a week before the due date, a “sudden illness” on the due date will not be considered as an excuse for late submission. Substantial mark deduction of 15% per day could result in such cases. Students who have long-term medical problems should consult the course coordinator immediately after obtaining medical certificates from doctors.

Problems with internet connections or traffic congestion, except the case that the Blackboard system is down, will not be accepted as an excuse for late submission. So you should make your submission well before the deadline.

Plagiarism: Plagiarism will be dealt with very seriously in this University. It is simply not worth trying!

All assignments will be checked for plagiarism using the Turnitin software, including submissions by other students. Students who are found plagiarising will be given an opportunity for explanation (but not an opportunity for resubmitting another assignment). If the explanation is not satisfactory, marks will be deducted down to as low as zero.

The School of Economics is committed to reducing the incidence of plagiarism. Further information on plagiarism and how to avoid an allegation of plagiarism is available under Section 6. Policies and Guidelines – 6.1. Assessment Related Policies & Guidelines of this Course Profile.
Criteria & Marking: 

Submission (15%)

  1. Correct format and proper referencing (1%)
  2. Clarity of writing (5%)
  3. The quality of data and references (4%)
  4. The accuracy and explanation of the forecast (5%)

The quality of data and references is determined by: (1) the range of data and references being used; (2) the authority/reliability of those data and references; (3) how up-to-date the data and references are.

The RBA Statement will be used as a reference to access the accuracy of stated facts/statistics/figures in an assignment.
Submission: A Word file should be submitted through the Blackboard course website (click the Assessment button on the left). Submission through email will not be accepted. All assignments submitted will be run through the Turnitin anti-plagiarism software (see the Plagiarism section below). You are allowed to resubmit your assignment as many times as you want before the deadline (the latest submission will over-write the previous one).

RBA Official Cash Rate Forecasting

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