At a glance
What prompted the review?
“Philip Lowe told us in late 2021 that interest rates weren’t going to rise until 2024.
The second most indebted households in the developed world are now going through the most aggressive tightening of monetary policy since the late 1980s.
“The fear among a growing number of people is whether the Reserve Bank is going to drive the country into recession, so that has really been pulled into the debate about the review, but the review itself was started for other reasons.
“One of those reasons is the fact that the Reserve Bank, unlike any other central bank in the developed world, had not had a look under the hood since the days of A$1 notes and A$2 notes in the early 1980s.
“It was about time for somebody to come in and go, ‘Look, let’s have an examination’, because monetary policies have changed so much.”
Monetary policy expertise gap
“There’s one economist from outside at the moment – that’s Ian Harper – who’s on the RBA board. None of the others have monetary policy expertise.
“Monetary policy expertise is much different to running a board or being involved in a business, so when you look around the world, central banks have gone to absolute monetary policy experts.
“Our board, apart from running the bank and keeping a check on the governor, also sets monetary policy.
“If I go to almost every other central bank in the world, none of them are run like that.
“They actually have either a specialist committee that sets interest rates, or the people who are on the broader committee for the bank have a deep and a huge background in monetary policy setting.”
Outcome predictions
“I think you will just see more transparency about the bank and its decision-making process. Again, we get to this point because of the structure of the board. Australians do not know how the debate played out and whether there was a difference of opinions.
If I go to the Bank of England, I can look and see there is a vote taken down of who voted for what, and the various board members can make their own cases.
“Chalmers has essentially said, ‘Right, let’s see if there are people out there who have an interest in monetary policy and have some knowledge about monetary policy, who we haven’t thought of and see if they want to put their hands up’.
“I wouldn’t be surprised to see some of our international academics put their hand up to go into this. I have a feeling the next governor of the Reserve Bank does not live in Australia right now.”
