in the position of having relatively high longer - term bond yields compared with other countries, despite the short - term policy rate being similar across countries. these relatively high bond yields were putting unhelpful upward pressure on the value of our own currency. given monetary policy developments overseas and the strong gravitational pull of very low global interest rates, the board judged that it was now appropriate to combine the 3 - year yield target with a quantity target for bond purchases. this judgement was reinforced by the outlook for unemployment and inflation that i discussed earlier. as the deputy governor outlined in a speech last week, the movement in market prices in response to this package was broadly as we expected. the board will continue to review the details of this package at our future meetings. we are prepared to do more, if that is required. having said that, we are still of the view that a negative policy interest rate in australia is extraordinarily unlikely, with any benefits being outweighed by the costs. the board recognises that its decisions have an uneven effect across the community. how any given australian is affected depends very much on their own financial situation. as we have discussed at previous hearings, people who rely on interest as a significant source of income find this a difficult time. people with more diversified sources of income and assets, including a home, tend to be in a better position. and those people who benefit most from monetary stimulus are those who get a job or retain a job because of this stimulus. the benefits here are wider, though, than just those to the individual. when more people who want jobs have one, the whole community benefits too. this is not just in terms of stronger household income growth but in an improvement in a wide range of social indicators as well. in making its decisions, the reserve bank board is looking at this whole picture. consistent with the mandate given to it by parliament, the board is seeking to maximise the collective welfare of the australian people. as we do this, we are also paying close attention to asset prices and trends in household debt. at previous hearings we have discussed the effect of low interest rates on housing prices, the incentive to borrow, and medium - term economic and financial stability. these remain issues that we are continuing to monitor. but in the current environment, the bigger stability risk is a protracted period of high unemployment, rather than excess borrowing. when people don ’ t have jobs, their spending is curtailed and they have difficulty servicing their debts.

twenty years ago. the links between monetary policy, fiscal policy and financial stability policy may be more prominent now than they were two decades ago. one can question the central bank's understanding of the functioning of the macroeconomy and the monetary policy transmission process, but that is a separable issue from the validity of independence. that said, the questioning of the framework itself is a vital quid pro quo for independence. the accountability of central banks to the political process and the public more generally is critical. to be able to take independent decisions about the appropriate stance of monetary policy, a central bank has to appropriately justify them. while the combination of goal dependence and instrument independence in terms of monetary policy has stood the test of time, the equivalence in terms of financial stability is more an open question. both the goal of financial stability and the instruments are much less clearly defined at present. while central bank independence in terms of monetary policy was all the rage in the first part of the 1990s, a similar focus in terms of financial stability today is warranted. endnotes [ * ] thanks to stan fischer for his education, example, guidance and support over many years. thanks to ed balls and bruce preston for helpful discussions. ed balls and his co - authors have recently written a paper covering many of the same issues. debelle g and s fischer ( 1994 ), ‘ how independent should a central bank be? ’ in jeffrey c fuhrer ( ed ), goals, guidelines, and constraints facing monetary policymakers, federal reserve bank of boston conference series no. 38, north falmouth, massachusetts, pp 195 – 221. munchau m ( 2016 ), ‘ the end of the era of central bank independence ’, ft. com site, 14 november. available at < https : / / www. ft. com / content / 8d52615e - a82a - 11e6 - 8898 - 79a99e2a4de6 >. see also w den haan, m ellison, e ilzetski, m mcmahon and r reis ( 2017 ), ‘ the future of central bank independence : results of the cfm - cepr survey ’, 10 january and fels j ( 2016 ), ‘ the downside of central bank independence ’, pimco macro perspectives, may. adam posen reached the same conclusion in his phd thesis. see posen a ( 1995 ), ‘ central bank independence and di