Australia adopted flexible inflation targeting with a numerical target of inflation
rate as a thick point target maintaining it at 2 point something 1. In case the
target went beyond the range, it was allowed to return back to its targeted range within a longer time horizon. This led to exercise more policy flexibility, leading to less variation in output. This approach had the least support from modelbased tools but had maximum policy flexibility absorbing the supply and demand shocks more smoothly, putting Australia at another end of the spectrum on which Bank of England operated with high model based approach and fewer policy adjustments in the long range. Even, if the Australian approach seems to be one of the above described theoretical models, but in practice the approach also adopts flexibility in decision making in cases of target breach and strong communication policy, leading to positive signals to the market, thus having more control on real economic indicators than other advanced economies. Testing of this approach happens during demand and supply shocks. In case of demand shocks the monetary response and other actions are same for achieving real objectives such unemployment rate and nominal objectives such as interest rates and monetary aggregates and approach for real and nominal objectives remains the same, however during supply shocks, response might vary in short range but the policy provides enough flexibility to accommodate this variability. In terms of ranking, Reserve bank of Australia (RBA) gives more emphasis on minimizing short term output variability than on inflation targeting variability.