What is the primary goal of the Reserve Bank of Australia?

• A. To regulate government budgets
• B. To maximize employment in the short term
• C. To control fiscal policy
• D. To maintain price stability with inflation around 2-3%

Answer: (D)

The main idea here is price stability. The Reserve Bank of Australia is the country’s central bank, and its primary objective is to keep inflation under control so prices don’t swing wildly. It targets inflation around 2–3% over the medium term.

Why that matters: stable prices make it easier for households and businesses to plan for the future, protect purchasing power, and prevent disruptive wage-price spirals. The RBA uses monetary policy, mainly by adjusting the cash rate, to influence spending and demand so inflation stays near that target. If inflation runs high, the bank might raise rates to cool demand; if inflation is too low, it might lower rates to stimulate activity.

The other options describe roles that belong to the government or are broader outcomes. Regulating government budgets is fiscal policy, not the central bank’s job. Controlling fiscal policy and maximizing employment in the short term aren’t the central bank’s primary mandate in Australia—the focus is price stability, with employment and growth being supportive outcomes rather than the explicit primary goal.