CANBERRA, AAP – An expected review of the Reserve Bank of Australia should aim for greater transparency and a board that includes monetary policy experts, a webinar has been told.
Such an examination is expected after the next federal election with both major parties endorsing a call by the Organisation for Economic Cooperation and Development for a review.
A panel of economists on a Grattan Institute webinar agreed a review now would be timely as the economy recovers from the pandemic.
“There is a case to made that the Reserve Bank probably hasn’t done as well as it could have in the last decade,” the institute’s economic policy program director Brendan Coates said.
He said inflation has been below the two-to-three per cent target band for the last seven years, and in that time unemployment has been probably higher than it should have been and economic growth sluggish.
He noted there are fewer monetary policy experts on the RBA board than other central banks.
Former RBA board member Warwick McKibbin agreed there needed to be a mix of experts on the board.
He also said while the Treasury secretary should provide a briefing at the monthly board meeting, he thought it was a conflict of interest for the secretary to have a voting right as they do now.
At meetings now, the board is presented and debates a paper and recommendation put together by RBA staff.
“The governor would prefer to have a unanimous support and that’s normally what you get,” Professor McKibbin said.
“Instead of putting one view to the board, my view would be you have multiple views.”
EY chief economist Joanne Masters said Australian central bank officers presented one official line, whereas members of the US Federal Reserve are able to talk “openly and respectfully” and debate issues.
She said with the RBA’s “pretty sanitised” approach, you get financial markets butting up against and testing the official view.
“When there is so much uncertainty around, as we are still seeing post-pandemic, you are going to get more periods of dislocation and butting of heads and I’m not sure that’s always helpful,” Ms Master said.
Mr Coates believes doing regular press conferences would be a way forward, something governor Philip Lowe has only done twice during the pandemic.
“At the moment, the Reserve Bank compared to other central banks that we have looked at certainly looks less transparent,” he said.
Transparency aside, Prof McKibbin believes Australia is about to go through the most significant structural reform in Australian history in response to pursuing net zero emissions by 2050.
“That requires an all of government and opposition framework. It requires coordination, not just of monetary policy and fiscal policy, also climate policy,” he said
“You don’t want the central bank raising interest rates because of inflation when you are trying to deal with this transformation.”
Ms Masters said the broad-based review should also understand the effectiveness of the new policies the RBA has used during the pandemic, aside from the traditional cash rate, such as its bond buying program.