Australia central bank to get new rate-setting board under review recommendations
AN INDEPENDENT review of the Reserve Bank of Australia (RBA) has recommended creating a specialist board to manage monetary policy that would be chaired by the governor and have a dual mandate of price stability and full employment.
The central bank should keep its flexible inflation target of 2-3 per cent but aim to return inflation to the mid-point rather than average it over time. Importantly for market confidence, the RBA’s Monetary Policy Board (MPB) would retain its independence from government control.
Treasurer Jim Chalmers has indicated in-principle agreement to all 51 of the recommendationsmade by the review which he set up last July with an eye to making the RBA “fit for the future”.
The review recommended the RBA’s current single board be split into one for monetary policy and one for governance with an external chair that would oversee operations such as human resources, finance, risk management and technology.
The MPB would comprise the governor and deputy governor of the RBA, the Treasury Secretary and six external members with expertise of open-economy macroeconomics, the financial system, labour markets and the supply side of the economy.
The review recommended the MPB meet eight times a year, instead of the current 11 meetings, and an unattributable record of voting should be published in the post-meeting statement and minutes should include points of disagreement.
External members would be appointed for a term of five years, with the possibility of reappointment for up to one year.
Members should be expected to discuss the Board’s decisions in public from time to time, and statements released after policy meetings should be agreed by them and published in their name, the review said.
The review said the RBA should better explain its policy choices through regular press conferences and increasing the amount of information available about deliberations, strategy, and its forecasts.
MPB members should be more accountable for their role in setting monetary policy, the review said.
The review recommended the government should legislate the changes to commence from July 1, 2024. REUTERS
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