The target was the operational interpretation of the goals of monetary policy set out in the Reserve Bank of Australia’s founding legislation in 1959, namely: the stability of the currency of Australia the maintenance of full employment in Australia; and the economic prosperity and welfare of the people of Australia.
The stability of the currency goal reflects the fact the legislation was written when fixed exchange rates were the norm. It has been interpreted as preserving the purchasing power of the currency and hence is consistent with the maintenance of low and stable inflation. As noted, the inflation target was first adopted by the Reserve Bank in 1993.