Reserve Bank's Glenn Stevens says inflation target here to stay

Jacob GreberSenior correspondent

Updated May 24, 2016 – 2.15pm, first published at 1.12pm

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Reserve Bank of Australia governor Glenn Stevens has staunchly defended his 2 to 3 per cent inflation target, saying it will continue to be used by the bank as it sets interest rates in future.

Declaring it the use of a specific target to be the "best monetary framework we've ever had and we've tried a bunch," Mr Stevens also called for patience in the power of monetary policy to help boost economic growth and restore inflation back into the target range.

"By the same token, we shouldn't just give up and throw away a framework that's very successfully," Mr Stevens told a function in Sydney organised by the Trans-Tasman Business Circle.

Mr Stevens also emphasised that the central bank maintains a flexible approach to the target.

"It is not at all a very rigid thing that demands knee jerk responses on our part," Mr Stevens said.

"It has got adequate flexibility to look at the broad picture."

The remarks follow a debate among several former Reserve Bank governors and board members about whether this month's surprise quarter-point interest rate was necessary, with calls from some circles for the central bank to revisit its adherence to the target range.

The governor also noted that last week's Pre Election Fiscal Outlook underscored the risks facing Australia and its budget position.

"The budgetary situation will be OK if nothing else goes wrong," he said. "You can't really assume in life that nothing will go wrong over an an extended period.

Glenn Stevens is likely to cut rates again before stepping down as governor. Luis Ascui

"I suspect there are quite some years of hard repair work ahead for whomever is the government over the period ahead.

"That's the reality, and it's good that the two secretaries (of Treasury and Finance) make that clear (in last Friday's PEFO)."

Jacob Greber writes about politics, economics and business from Canberra. He has been a Washington correspondent and economics correspondent. Connect with Jacob on Twitter. Email Jacob at jgreber@afr.com