The Reserve Bank of Australia (RBA) needs more financial professionals on its board as part of a highly needed structural reform, said the Chief Economist of the Independent Research Center.
Peter Tulip, who previously worked for RBA, said many media reports suggested an external RBA review to focus on the bank’s inflation target, but that wasn’t a major issue.
“The answer is that we are overly dependent on one corrupt individual, the governor. The RBA needs a better process to identify and correct any mistakes he may make. . “Tulip Said on paper.
The RBA has been unable to continuously reach its 2-3% inflation target for about five years before it surged to the recent 5.1%.
Tulip said these consistent failures were “not accidental, but expected” because most of the central bank’s board members are not financial experts.
“”[RBA board members] You can ask good questions, but you can’t challenge the governor effectively, “he said.
Tulip also said that increasing public transparency about the decision would increase accountability to banks and reduce the likelihood of mistakes.
“If the RBA needs to explain its decision in public, it will make more and more permanent mistakes,” he said. “Given that it affects millions of households and the RBA has a large staff to do the drafting, we need to raise the bar for monetary policy.”
The Organization for Economic Co-operation and Development (OECD) said in September 2021 that it was the “appropriate time” to review Australia’s monetary policy framework.
“The pandemic heritage in the form of increased public debt and limited space in monetary policy will be a challenge for future macroeconomic management,” he said.pdf).
Both key parties are also in favor of conducting an independent external review of the RBA, the first review of the entity since 1981.
Shadow Treasury Jim Charmers previously told the National Press Club that if Labor wins the election, it will be a good time to review RBA’s efforts towards inflation targeting and other aspects.
“Because we did the final review of the Reserve Bank … we experienced two sets of difficult times, we had extraordinary monetary policy,” he said. Said Reporters on April 5th. “And there was this big question that seemed to be poorly answered in a thoughtful and well-thought-out way about the interaction of fiscal and monetary policy.”
Finance Minister Josh Frydenberg is also working on an independent review of the post-election RBA and its monetary policy.
The RBA is currently under pressure to raise its cash rate in response to the surge in inflation, regardless of the upcoming elections.
“Moving both during the campaign and shortly after the federal elections … may remove some of the politics from this imminent tightening cycle,” said Su-Lin Ong, chief economist at RBC Capital Markets.